Arcelor Mittal Activity Report 2006 - paperJam

Arcelor Mittal Activity Report 2006

Contents01 Arcelor Mittal: A Winning Strategy02 Portrait of the Group – 200604 Chairman’s Statement06 Message from the President and CEO10 Questions for the CEO12 Questions for the Group Management Board16 2006 Monthly Highlights18 Global Presence20 Board of Directors24 The Group Management Board26 Management Committee32 Company Profile and Global Business Strategy36 Health and Safety38 Performance EnhancementOperational Review40 Flat Carbon Americas42 Asia, Africa, Commonwealth of Independent States (AACIS)44 Long Products, AM3S, Wire Drawing48 Flat Europe, Automotive, Plates, R&D52 Portfolio – Corporate Functions54 Integration Review60 Technology and Innovation62 HR Policy and Skills Development66 Environment68 Communities74 Corporate Governance88 Market Information90 Key Operating SubsidiariesFinancial and Legal InformationArcelor Mittal Pro Forma Consolidated Statements – Unaudited94 Consolidated Statements of Income95 Consolidated Statements of Cash Flows96 Key Financial and Operational InformationMittal Steel N.V. Consolidated Financial and Other Information98 Consolidated Balance Sheets99 Consolidated Statements of Income Data & Other Information100 Consolidated Statements of Cash Flows101 Auditors’ ReportThe financial information in the Arcelor Mittal Activity Report 2006 has beenprepared in accordance with International Financial Reporting Standards as adoptedby the European Union. This financial information does not contain completeinformation related to the statutory account of Mittal Steel Company N.V.,which must be adopted at the Annual General Meeting of shareholders pursuantto Dutch law. A copy of the Dutch statutory accounts can be obtained free of chargeby contacting the registered office of Mittal Steel Company N.V., Hofplein 20,15th floor, 3032 AC Rotterdam, The Netherlands, or by contacting theABN AMRO Service Desk at +31 (0)76 579 9455.All figures relating to Arcelor Mittal are pro forma (unaudited).The pro forma information reflects the combined businessas if the acquisition of Arcelor and its subsidiaries had taken placeat the beginning of the period presented.

Arcelor Mittal Activity Report 2006 01Arcelor Mittal: A Winning StrategyArcelor Mittal is the number one steelcompany in the world, with 320,000employees in more than 60 countries.Created from the merger between Arcelorand Mittal Steel, the Group is the leaderin all major global customer segments,including automotive, construction,household appliances and packaging.Arcelor Mittal has leading Researchand Development (R&D) and technology,sizeable captive supplies of raw materialsand outstanding distribution networksto support its production process forminga truly integrated business model.With an industrial presence in 27 European,Asian, African and American countries,the company has a substantial presencein all the key steel markets providinggeographic as well as product diversity.Arcelor Mittal will now be looking tofurther build on its leading positionboth organically and by acquisition,particularly in high-growth developingmarkets. The company believes thatglobalisation and consolidation are theonly way forward to ensure long-termsustainability and maintain profitability,throughout variable steel cycles.Such a global presence brings considerablesocial responsibility. Arcelor Mittalis a responsible, community-mindedorganisation which places considerableemphasis on critical functions includingHealth and Safety, Environment andCorporate Social Responsibility.Quality is another area of particularfocus for the company. The Group’sinvestments in innovation and Researchand Development benefit customersand drive improved competitiveness.Arcelor Mittal produces a diversifiedportfolio of quality products and servicesto meet a wide range of customers’ needsacross all steel consuming industries.Strong relationships with customers arefurther strengthened by innovative R&Dfacilities satisfying the most sophisticatedcustomer demands.These investments also provideopportunities for worldwide operations,so as to enhance and share best practices.The company recognises the importanceof intelligence sharing and exchangingideas between business segments toimprove business performance.The merger has also boosted financialstrength and sustainability. The year 2006pro forma financials show combinedrevenues of US$88.6 billion, with a crudesteel production of 118 million tonnes,representing around 10 per cent of worldsteel output. On a pro forma basis,the company has now reported EBITDAof approximately US$15 billion for the pastthree years, demonstrating how the newlydiversified geographic and product profileis helping deliver sustainable results.Arcelor Mittal believes this winning strategyhas not only created the market leadingposition enjoyed today, but ideally positionsthe company to lead the steel industry intoa new phase of quality and sustainability.

02 Arcelor Mittal Activity Report 2006Portrait of the Group – 2006Arcelor Mittal is the only truly global steel company.In 2006, the Arcelor Mittal group produced over 118 milliontonnes of steel and generated revenue of US$88.6 billion.It directly employes more than 320,000 personnel in over60 countries and is rightly regarded as the undisputedleader in its core businesses.US$88.6billionsalesrealised by Arcelor Mittal in 2006.

Arcelor Mittal Activity Report 2006 03Arcelor Mittal pro forma figures (unaudited)2006 88,576 (+10.5%)200580,1712006 110.5 (+7.4%)2005102.9Sales(million US$)Shipments(million tonnes)2006 15,272 (+2.1%) EBITDA200514,959(million US$)2006 11,824 (+1.5%)200511,6482006 7,973 (-3.5%)2005 8,263Operating income(million US$)Net Income(million US$)Mittal Steel legal figures2006 58,870 (+109.3%)200528,1322006 9,795 (+67.7%)2005 5,842Sales(million US$)EBITDA(million US$)2006 7,499 (+58.6%)Operating income2005 4,729(million US$)2006 5,226 (+58.3%)20053,301Net income(million US$)

04 Arcelor Mittal Activity Report 2006Chairman’s StatementDear Shareholders, Ladies and Gentlemen,2006 was a very memorable year for the steel industry.It marked the creation of Arcelor Mittal throughthe merger of the world’s two leading steel companies,creating a new undisputed global market leader.

Arcelor Mittal Activity Report 2006 05It is a great honour for me to be theChairman of this new company, one thatreally does lead the world in terms notjust of our global presence or our productoffering, but also in terms of financialstrength and stability, as evidenced byour pro forma annual results.The company benefits from theexceptional leadership of Lakshmi Mittalas President and Chief Executive Officer,who has set the scene for a very successfulintegration. Lakshmi is supported by oneof the strongest and most experiencedmanagement teams in the steel industrytoday and this can only bode wellfor the future.The rapid progress we have made in theintegration has been very encouragingand fills me with confidence about thefuture of our combined Group. It becamevery clear to me from the outset that,while being very different, our companieshad a great deal in common and ourpeople quickly set about working handin hand together.We have implemented a joint businessplan and developed a tailored managementsystem in a merger of equals basedon business values benefiting fromwide support among the shareholders.Both companies also have a wealthof experience of making mergers workfor our stakeholders.Before the merger, both companieshad grown strongly and had demonstratedsuccessful integration. Following thecreation of Arcelor in 2002 through themerger of Aceralia, Arbed and Usinor, thenew steelmaking group swiftly positioneditself as a leader in innovation, quality,sustainable development and socialdialogue while continually improvingfinancial results. Mittal Steel meanwhilehad grown through several transformationalacquisitions. As with the merger to createArcelor, Mittal Steel began immediateintegration of these and other acquisitions,improving performance and deliveringsynergies. These past experiences notonly demonstrate how our new company,Arcelor Mittal, has plenty of integrationexperience to call on over the comingmonths, but also how we were bothcommitted to steel consolidation as themost important dynamic of our industry.I am happy to report that havingspent several months working as onesingle company, we have not forgottento look forward. We have our gazefirmly looking towards the future in orderto continue developing the largeststeelmaking company in the world.Furthermore, we aim to be the mostadmired steel company in the world,a company that views itself as exemplaryin terms of the Health and Safety ofits employees, its interaction with itsworkforce and its contribution to thecommunities in which it operates.In addition, we also aim to be leadersin the way we run our company, our productquality, customer services, innovationand sustainable development. We aimto continue our focus on cost reductions,courtesy of the ongoing and systematicexchange of best practices anda permanent concern for the best possiblelevel of production.Arcelor Mittal is the first truly global steelcompany. In 2006, the Arcelor Mittalgroup produced over 118 million tonnesof steel and generated revenue of US$88.6billion. It directly employs more than320,000 personnel in over 60 countriesand is rightly regarded as the undisputedleader in its core businesses. The Groupalso continues to expand its miningoperations, with projects announcedin Liberia and Senegal, which underlineour commitment to building the only trulyintegrated steel company in the world.Arcelor and Mittal Steel both pridedthemselves on their Research andDevelopment policy. The merger of thetwo companies allows us to bring togetherthese programmes and leverage theircombined output across the whole Group,for the benefit of our customers. Withouta doubt, Arcelor Mittal’s Research andDevelopment capabilities are the mosttechnologically advanced in the world.The Arcelor Mittal share is currently listedon the markets in New York, Amsterdam,Paris, Brussels and Luxembourg, andon the Spanish markets in Barcelona,Bilbao, Madrid and Valencia.Today, in early 2007, the economicenvironment remains favourable and thedemand for steel products continues tobe driven by China’s prodigious appetitefor steel. Arcelor Mittal is remarkablywell positioned to take advantage of thissustained demand and of the opportunitiesthe Group will have for external growth.Increasing investment projects and therealisation of several acquisitions testifyto this. These achievements support ouranalysis of the key role of the corporatespirit of the founding companies in ArcelorMittal’s vision of the accelerating trendtowards consolidation in the global steelindustry. In their own way and by dintof their unique talents, the two companieshave already greatly contributed towardsshaping the development of the historyof steel in Europe and in the world.Both have also played a major role in therenewed interest of the financial marketsin steel securities. United within a singlecompany that is already doing its partnersand staff proud, they will continueto fashion the future of steelmaking andto provide the profession with leadershipon a global scale.As well as thanking my colleagues on theBoard of Directors, I would like to take thisopportunity to thank all our shareholdersand other stakeholders for their continuingsupport and look forward to the next stagein the development of Arcelor Mittal.Sincerely,Joseph Kinsch,Chairman of Arcelor Mittal

06 Arcelor Mittal Activity Report 2006Message from the President and CEO2006 has been a groundbreaking year for the steel industry.It saw the creation of Arcelor Mittal, the world’s first 100 million tonnesplus steel company in a merger which highlighted the benefitsof a more consolidated steel industry and which I am pleased to say,has been followed by a new phase of consolidation in our industry.

Arcelor Mittal Activity Report 2006 07It has been some nine months sincewe announced the merger and I amdelighted by how quickly the two companieshave become aligned. I can say withconfidence that the success of themerger to date has surpassed even myown expectations. The collaborationbetween people is very strong andeffective, and everyone is motivated by theconsiderable opportunities ahead of us.Today Arcelor Mittal enjoys a uniqueprofile in the steel industry, witha balanced operating portfolio acrossEurope, America and Asia. Additionaldiversity is provided by our broadproduct portfolio, which encompassesboth long and flat products for a widerange of customer segments, includingautomotive, white goods and construction.Furthermore, we are the only steelcompany to operate a truly integratedmodel from mining through steelproduction to distribution.One of the clear priorities for 2007is ensuring a successful integration.I am very pleased to report that weare making excellent progress in thisregard. It was clear from the beginningthat the two businesses benefitedfrom complementary business models,which have formed the basis fora positive integration.The first task of the integration processwas to establish the senior managementof the company. I believe that inmy colleagues on both the GroupManagement Board and the ManagementCommittee we have the strongestsenior team in the steel industry today,offering a collective wealth of knowledgeand experience. In particular I wouldlike to thank Roland Junck, Aditya Mittal,Malay Mukherjee, Gonzalo Urquijoand Michel Wurth for their commitmentand hard work over these critical firstmonths of the merger, ensuring the newcompany sets off in the right directionfrom the outset.It is their leadership which hashelped set the tone for the considerableexcitement now permeating thecompany. People are motivated bythe future opportunities and prospectsthe merger has created and this givesme great optimism for the future.The merger is creating many benefitson both a geographic and product basis.For example our plants in EasternEurope are benefiting from the expertiseof their new colleagues in WesternEurope. This will enable them to morequickly improve product mix and takeadvantage of the demand growth formore sophisticated products in this market.Similarly in automotive, our teams fromEurope and the United States are workingclosely together to create a global solution,supported by our combined industry-leadingResearch and Development function.I have been delighted to see how wellpeople are working together, sharing theirknowledge and expertise to enhanceperformance. In order to maximise thisopportunity we have adopted a newapproach of “twinning” operating facilitieswith similar units in order to accelerateand enhance operational excellence acrossthe company. This approach is alreadyproving very effective and also providesemployees with an opportunity to integratedirectly and share knowledge, ideasand best practice with their new colleagues.The success of the merger is alsoreflected in the financials. Mittal Steelreported record results for the twelvemonths ended 31 December 2006with sales soaring 109.3% to US$58.9billion, EBITDA increasing 68% toUS$9.8 billion and net income up 52.4%to US$5.2 billion on account of themerger with Arcelor. The pro formanumbers for the year clearly demonstratethe financial strength of the newcompany with revenues of US$88.6 billion,EBITDA of US$15.3 billion and netincome of US$8 billion, a result whichwould place us amongst the world’slargest corporations according toFortune 500’s 2006 global ranking.I believe that our stronger, morediversified business model will enableus to maintain a consistent earningsbase. Indeed, over the past three years,Arcelor Mittal has reported pro formaEBITDA of approximately US$15 billion,demonstrating a stability that neithercompany would have achieved on its own.This is a great achievement which manystakeholders would not have believedpossible only a few years ago.Cashflow continues to be strong,with the company generating US$4.3billion of cashflow in the fourth quarter.Net debt was reduced by US$2.3 billionin the quarter and at 31 December2006 stood at US$20.4 billion,representing an NFD/EBITDA of 1.3x.Our confidence in the continued financialstrength of the company is reflectedin our decision to implement a newdividend policy, paying out 30% of profitsby way of a dividend and share buy-backto shareholders each year, and havinga minimum dividend payout commitment.This is an unprecedented step fora steel company and one which webelieve serves to underline the resilienceof our business model.The stability of the new global anddiversified model is reflected in thestock price, which has risen some40% since the merger was announced.There can be no greater an endorsementfrom the financial community.Whilst integration is a main priority,we do not intend to allow this to distractus from continuing to look for opportunitiesto create further value.

08 Arcelor Mittal Activity Report 2006Message from the President and CEOcontinuedToday the steel industry is in a muchhealthier position, due to a combinationof good global demand growth anda more consolidated industry. Nevertheless,the industry remains fragmented andit is important that the momentumof consolidation is maintained.Indeed, since the merger wasannounced, the new company hasdemonstrated its continued commitmentto pursuing growth opportunities withthe acquisition of Sicartsa in Mexicoand the intention to pursue a Greenfieldopportunity in the Orissa state of India.We have also taken steps to furtherincrease our iron ore sufficiency,having acquired facilities in Liberiaand Senegal.Similarly, we are also focused onmaximising organic growth potentialand have identified many differentand exciting projects in this regard.These include increasing slabcapacity in Brazil; the commissioningof the new hot strip mill in Krakow,Poland; expansion in the Ukraine;capacity increase at Acindar, Argentina;and de-bottlenecking leading to capacityexpansion in South Africa.As we continue to grow, we will alsoensure that we do not take our eyeoff the ball on important areas suchas cost leadership. Although the industryhas made great steps forward in termsof sustainability, being cost-consciousat all times must remain a priority.Looking forward, I am optimistic aboutthe future. Economic indicators arepositive and steel demand growthis expected to remain at between 3 –5% per year for the foreseeable future.Consolidation should continue,improving the overall health of theindustry and enabling us to takefurther steps towards creating a moresustainable environment. China remainsthe greatest challenge, but encouraginglycurrent indicators demonstrate thatChinese exports are beginning to fall.Additionally it is important that theChinese steel market, which remainshighly fragmented, also startsto consolidate in order to be ableto manage supply and demand moreeffectively. The Chinese governmenthas voiced its support for consolidationand I would hope we will see a movein this direction over the next few years.Arcelor Mittal is in an excellentposition to benefit from these underlyingconditions. Our merger was basedon very sound industrial logic of whichthere are already a number of tangibleresults. Integration is progressing well andwe are well positioned for further growth.We also want to build on our reputationas the most admired steel companyin the world. In this regard we are equallyfocused on demonstrating industryleadership across critical areas includingHealth and Safety, the environment,Corporate Social Responsibility andHuman Resources.I would like to take this opportunityto thank my colleagues on the Boardof Directors whose leadership andadvice, under the guidance of ChairmanKinsch, has been invaluable during thesecritical first months of the integrationprocess. We are very fortunate to havesuch a strong Board of Directors,drawn from a wide range of industriesand backgrounds.Finally, I would like to extend mythanks and appreciation to all ourstakeholders who have supported usover the years. Specifically, I would liketo extend my thanks to all our 320,000employees. Mergers can be unsettling,but I have been very impressed withthe way everyone has alignedthemselves quickly in the new company,which sends very positive signals forour future development.Sincerely,Lakshmi N. Mittal,President and Chief Executive Officer

Arcelor Mittal Activity Report 2006 09I believe that our stronger,more diversified business modelwill enable us to maintain a consistentearnings base. Indeed, over the pastthree years, Arcelor Mittal has reportedpro forma EBITDA of approximatelyUS$15 billion, demonstrating a stabilitythat neither company would haveachieved on its own.For Mittal SteelSales soared 109.3% to US$58.9 billionEBITDA increased 68% to US$9.8 billionNet income went up 52.4% to US$5.2 billionFor Arcelor Mittal pro forma (unaudited)Revenues of US$88.6 billionEBITDA of US$15.3 billionNet income of US$8 billion

10 Arcelor Mittal Activity Report 2006Questions for the CEOArcelor and Mittal Steel were natural business partners with anextraordinary geographic and product fit, says CEO Lakshmi N. Mittal.Both shared one very important trait: “we were both committed to andfocused on improving the underlying sustainability and health of the globalsteel industry”. The merger is living up to its promise – delivering theanticipated synergies and creating exciting opportunities for the future.It is now nearly nine months sincethe merger between Arcelor and MittalSteel was announced. Is it havingall of the benefits that you envisaged?Absolutely. One of the most excitingthings about this merger was thatthe two businesses were entirelycomplementary with virtually no overlap.In a consolidating steel industry, Arcelorand Mittal Steel were natural businesspartners and the past nine months haveonly served to further convince us of thecompatibility between the two companies.Arcelor Mittal is the first truly global,diversified and integrated steel producerand there are a wide range of benefitsassociated with such a model.Can you elaborate moreon these benefits?I have always believed that a businessmodel based on size, scale anddiversification would be necessary tounlock the value potential of the steelindustry. Steel has historically sufferedfrom severe volatility and cyclicality duelargely to its fragmented nature whichhas resulted in the very low multiplesstill afforded to the sector today.Whilst the sector will always havesome degree of cyclicality, the severityof the cycles can be reduced throughconsolidation of the industry and theemergence of a number of key playerswith a more diversified and global operatingbase. Arcelor Mittal is the first suchcompany to be created and we are alreadyseeing the benefits in terms of creatinga more sustainable operating environment,which will have considerable benefitsfor all stakeholders.Your share price has had a good runsince the merger was announced.Do you think that the re-rating of thestock and the sector has now occurred?Our share price has performed verywell since the merger was announced,rising some 40% in the months following.It is pleasing to see that the market cansee the benefits and further potential themerger has created. Compared with otherindustries though, we still believe steelis underrated. There is a big opportunityfor steel companies to prove that the newbusiness model has momentum andcan create results. If we can continueto demonstrate progress, then I believethe re-rating should continue.Mergers are notoriously difficult.Have you encountered manyproblems and issues in integratingthe two companies?Mergers will always create challengesand issues, but the integration betweenArcelor and Mittal Steel has beenremarkably straight forward. This is largelydue to the fact that the two businessesdid not overlap at all in terms of operations.Also, the two businesses really arevery complementary and this is provingvery motivational in terms of encouragingpeople to work together to share theirskills and expertise. This cross-fertilisationof knowledge and skills should helpus accelerate the business plan of thecompany and deliver on our potential.Can you give any examples of this?There are many different examples.The European business is one.By harnessing the experience and qualityof the Western European plants, weare able to transfer this to the EasternEuropean plants to help them improveproduct quality and mix and be betterpositioned to serve a growing and moresophisticated product base.The automotive business is another goodexample. We have now created a globalautomotive segment which is in a positionto offer a global solution to one of our mostimportant global customers. CommercialCoordination, Marketing and Researchand Development on both sides of theAtlantic is being unified in order to improvethe level of service and quality we areable to offer the car makers. There arealso benefits downstream in that we havebeen able to combine the service centreswith operational facilities in order to cutout third parties such as traders.What about the culture of thecompanies? Is that compatible?Both companies shared one veryimportant trait: that we were bothcommitted to and focused on improvingthe underlying sustainability and healthof the global steel industry. This has actedas a strong unifying force and I believeis forming the basis for the successfulmerger. We are all steel industryprofessionals who have lived throughthe volatile cycles for many years andwho all share a desire to work towardscreating a healthier operating environment.The fact that we are making tangibleprogress towards this is providing furthermomentum and motivation. We arereally building on the strengths of bothcompanies to create a new culture whichis both structured and dynamic andthis has been very successful to date.What is the focus of the companyfor 2007?Effecting a successful integrationis clearly key and we are making excellentprogress in this sphere. Also we want tocontinue to exploit growth opportunitiesglobally, both organically and by acquisition.In addition, Health and Safety, for all ouremployees, will be major concern in 2007.Which countries do you see this growthcoming from?Organic growth will come from our existingoperations and there are particularopportunities in the growth markets suchas Brazil, South Africa and Eastern Europe.In terms of further acquisition, we willlargely be focused on growth economies,with a special focus on AACIS and MiddleEast countries. We will also continue tofurther develop our integrated businessmodel, most specifically by increasing ourcaptive iron ore reserves and resources.Are you confident about the futureprospects of Arcelor Mittal?I am very confident about the company’sfuture prospects. The merger has creatednot only the largest steel company in theworld, but more importantly the moststable. We have a real opportunity to buildon this and to lead the steel industry intoa new period of sustainability.

Our share price has performedvery well since the merger wasannounced, rising some 40% inthe months following. It is pleasingto see that the market can seethe benefits and further potentialthe merger has created.Arcelor Mittal Activity Report 2006 11

12 Arcelor Mittal Activity Report 2006Questions for the Group Management BoardMade up of six members and heading up a mergerof unprecedented size in the steel industry, Arcelor Mittal’sGroup Management Board recognise the challengesahead - not only in maintaining corporate functions butin driving sustainable development forward and continuallymonitoring Health and Safety.Are you pleased with theintegration so far?Roland Junck: As far as the corporatefunctions are concerned, I am very pleasedwith the integration process to date.It has really given us the opportunityto invigorate the corporate functions andlaunch new improved policies for criticalareas such as Health and Safety, HumanResources and Sustainable Development.Aditya Mittal: The integration is goingvery well. What has particularly impressedme is how well people from the twoorganisations are working together andhow quickly they have become aligned.I have had the opportunity to meet andtalk with a lot of our executives andemployees over the past months andthere is a lot of optimism and excitementthroughout the group about our futurepotential. Integration has proved tobe very motivating for all employeeswho can now enjoy challenging businessand career opportunities in a trulyglobal environment.Malay Mukherjee: I am finding that peopleare responding very well to the integrationprocess. If I use the example of stainlesssteel we have really been able to improvethe performance of this division in onlya short time and that has given a lotof motivation to the people in this team.Gonzalo Urquijo: I think the integrationis going better than any of us anticipated.We really have made a lot of progress sincethe merger was announced. Combiningthe two companies has enabled usto accelerate our respective strategiesand the progress is already very visible.I think employees are enjoying sharingtheir knowledge and expertise with theirnew colleagues and there is a definitesense of positive momentum.Michel Wurth: From the perspectiveof my operational responsibilities,integration is progressing well and onschedule. People seem excited by theopportunities created by combiningthe businesses which has created a newcompany stronger than the sum of thetwo parts. If I highlight the automotivesector, we are able to share technologiesand processes which will ultimately createconsiderable benefits for our customers.What are the benefits and gainsof the merger in your area of business?Roland Junck: With the huge diversityof the Group, we have the opportunityto gain enormously from the spreadof best practice. Through the PerformanceEnhancement unit, we are creatingteams of experts drawn from the operationin every area. The rest of the Groupwill be able to call on them at any time.This is a wonderful resource and onewhich is already reaping the benefits.There is so much that we can achievethrough the benchmarking of bestpractice and regular knowledge sharing.Through our Global Executive DevelopmentProgramme, we are providing enhancedcareer development opportunitiesfor our managers.Aditya Mittal: The gains span everyarea of the American flat business.We are sharing best practice bothnorth-south and east-west to good effect.Company-wide purchasing initiativesand shared services are deliveringoverhead savings. At the commercial level,we now have single account teamsin place to manage slab sales for CSTin Brazil and Lázaro Cárdenas in Mexico.Many more benefits will emerge as weoptimise the product flow and concentrateproduction of certain high-value productssuch as top-end plates.Malay Mukherjee: The gains arenumerous. Integrated distributionis a key one – allowing us to explorenew markets. The sharing of bestpractice in pipes and tubes is another.The opportunity to combine StainlessSteel’s purchasing of energy, scrapand alloys with that of the carbon steeloperations offers big synergies.Gonzalo Urquijo: Consolidated purchasing,moves to specialise plants around keyproducts, the integration of wire rod andwire drawing activities, the ability to drawon the international sales offices ratherthan rely on external traders – the listof gains is almost endless! But the keyone is the ability to improve logistics.By allocating plants to different marketswe can reduce the distance over whichproducts have to travel – what I call “steeltourism”. There will also be big advantagesfrom a refocusing of our investmentspending to avoid duplication and deliverquality improvements and cost savings.Michel Wurth: There are a lot of gains– from improved logistics, better sourcing,cross-selling and so on. But perhapsit is the rapid transfer of best practicesthat is the best example of internal gainsfrom the merger. For instance, in EasternEurope, each steel shop, each hot rollingmill, each production line, is being twinnedwith a counterpart in Western Europe.Through exchanges of personnel, bestpractice is being absorbed in a very rapid– and very unbureaucratic – fashion.What are the benefits of the mergerfor customers?Aditya Mittal: As a truly globalorganisation, we are now uniquely placedto support our global customers throughan in-depth partnership that pullstogether all the regional relationshipswe enjoyed with them before. With oneglobal account team for each majorOEM (Original Equipment Manufacturer),we are able to deliver them standardsolutions worldwide. The merger alsoenables us to offer our North Americancustomers a wider range of advancedsteel. And through the combinationof the two companies’ R&D efforts,we are better placed than ever to deliverthem the next generation of steel thatwill help them remain competitive.

Arcelor Mittal Activity Report 2006 13Roland JunckAditya Mittal Malay Mukherjee Gonzalo Urquijo Michel WurthMalay Mukherjee: We will be channellingall export sales through our in-housesales network, as opposed to throughagents. This will bring us closer toend customers and give us a better feelfor their needs, both now and in thefuture. Our investment programmein pipes and tubes is focused on drivingup quality and product sophistication– and driving cost down. Here again thecustomers will benefit.Gonzalo Urquijo: Having combined thetwo companies’ commercial organisations,we are able to deliver an enhancedproduct range and give a better service.Cost reduction measures arising out ofthe merger underwrite our competitivenessgoing forward. And by consolidating theproduct mix at different sites, we willbe better placed to partner our customersin their future plans.Michel Wurth: If I use automotive asan example, we are developing a uniquecapability to provide our customers withstandard solutions worldwide. With plantslocated close to theirs, we are in a positionto support their worldwide developments,pretty much wherever they may be.And with a combined US$185 millionResearch and Development budget,our customers can count on us to be evenmore innovative in the future – not onlyin the automotive field, but in packaging,home appliances and many other markets.The company recently held itsfirst global Health and Safety day.How important is Health and Safetyfor the Group?Roland Junck: There is nothing moreimportant than Health and Safety.Health and Safety considerationsshould supersede all others in everydecision we take. The recent Healthand Safety day was very well receivedand we used the day to raise awarenessand also as a platform to announceambitious new targets for lifting the safetyperformance in 2007. We are creatinga tracking and reporting mechanismthat will not only capture informationon every incident but will disseminatelessons learned from it quickly andefficiently to all parts of the Group.Our organisational structure will allowideas to move up and down thecommand chain quickly. Safety comesfirst – but it also requires every individualin the Group to play their part.What opportunities and challengesdo you see ahead?Roland Junck: Sustainability anddevelopment of our future leaders aretwo big issues. We have to demonstrateover and over again that we are a goodcorporate citizen, prepared not onlyto meet our responsibilities towards theenvironment, but also to play a supportiverole in the communities in which weoperate. To do this and meet our businesschallenges, we must attract and retaingood managers. One of the benefits ofthe merger is that it provides us with anopportunity to refocus on these criticalareas and strengthen our policies andactivities to develop our leaders and toensure we act in a socially responsiblemanner, year-in, year-out.Aditya Mittal: Arcelor Mittal hasconsiderable opportunities ahead of it.We must focus on delivering on thesynergies, developing integration anddemonstrating to the market the benefitsthe merger will create. If we can dothis, I believe we will see a continuingre-rating of the company and indeedthe broader industry. Clearly integrationis a priority for 2007, but we mustnot allow integration to distract us fromcontinuing to take advantage of growthopportunities when they arise. We havea clear competitive advantage at presentvis-à-vis the rest of the steel industry andwe must make sure we do not lose this.Malay Mukherjee: We need to respondto the high-growth of the African and Asianmarkets by expanding capacity, increasingquality and lifting the volume of finishedproducts we produce. At the same time,cost reduction will be key. And there willbe opportunity for acquisition and greenfieldopportunities in these markets and wehave to be ready for them.Gonzalo Urquijo: We have manyopportunities. If I take as an exampleAM3S, we are now working to replicateour leadership in Western Europenot only in Central and Eastern Europe,but also to export our proven skillsin construction to other parts of theworld, most notably the United States.We also want to expand our long productsbusiness, which is performing welland offers good stability to the Group.In the Americas, we need to seize thegrowth potential in Central and SouthAmerica. And in Europe, we needto drive capacity utilisation up to theappropriate levels and build on ourleadership position in key product areas.Michel Wurth: The profile of the companyreally gives us a unique opportunityto build a unified product for customersboth by sector and geography. In FlatEurope, the combination of the high qualityoperations in Western Europe, coupledwith the low cost base in Eastern Europeand the extensive service and distributionnetwork of AM3S, we have created a verystrong and unique offering. Eastern Europecontinues to be a strong platform forgrowth and our West European operationsshould help us accelerate their move intohigher quality products to service thisgrowing market. Our new global automotiveplatform is also a very exciting opportunityas it enables us for the first time tooffer customers a truly global solution.

14 Arcelor Mittal Activity Report 2006AutomotiveArcelor Mittal supplies an estimated 17.4 tonnes to the worldwideautomotive industry annually. Since the merger, a global organisationhas been put in place to serve the Group’s global automotive customers.Arcelor Mittal has the ability to serve an auto maker’s global platform,delivering standardised materials and specifications worldwide.Backed by a unique range of advanced steel grades and a powerfulResearch and Development effort, Arcelor Mittal can add genuine valueat every stage of vehicle design and production.

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16 Arcelor Mittal Activity Report 20062006 Monthly Highlights2006 has been a very exciting and challenging yearfor Arcelor Mittal. The new company has been at the forefrontof the consolidation process, leading the industry throughmergers and acquisitions.Creating the world’s largest steelcompany, Mittal Steel and Arcelorreach an agreement in June 2006to combine the two companiesin a merger of equals. The termsof the transaction were reviewedby the Boards of Arcelor and MittalSteel which each recommendedthe transaction to their shareholders.

Arcelor Mittal Activity Report 2006 17January 2006Historic moment for theGlobal Steel IndustryThe year starts with the historic launchof the Mittal Steel offer to the shareholdersof Arcelor to create the world’s first100 million tonne plus steel producer.The aim of increasing globalisationand consolidation, necessary in the steelindustry, defines the deal and sets thepace for the industry.February 2006Expansion and strong resultsMittal Canada completes the acquisitionof three Stelco subsidiaries, the Norambarand Stelfil plants, located in Quebec,and the Stelwire plant in Ontario.Stelfil and Stelwire will add 250,000tonnes of steel wire to the company’sannual production capacity, providinga wider product mix to better meetcustomers’ needs.Arcelor acquires a 38.41% stakein Laiwu Steel Corporation, in China.Laiwu Steel Corporation is China’slargest producer of sections and beams,and will further boost its operationalexcellence thanks to this partnership.It is still awaiting approval with theBeijing authorities.April 2006Renewal after Hurricane Katrinaand new galvanized lineOut of the devastation of HurricaneKatrina, arose a revitalised Mississippiyouth baseball field, rebuilt with thehelp of Mittal Steel USA and Arcelor.The companies provide moneytowards the purchase of lightingfixtures and steel cross bar support.It also arranges for and donates thelabour costs for their installation.Mittal Steel USA places a new lineinto operation in Cleveland to providetop-quality galvanized sheet steel toautomakers and other demandingcustomers. The new line is designedto produce in excess of 630,000 tonnesof corrosion-resistant sheet annually,using the hot-dip galvanizing process.May 2006US clears the way for bidMittal Steel announces US antitrustclearance for the Arcelor bid andthe approval of the offer documentsby European regulators. The acceptanceperiod starts in Luxembourg, Belgiumand France on 18 May 2006 (somedays later for Spain and the UnitedStates) and lasts until 29 June 2006.Arcelor contributes to the firstanti-seismic school building in Izmit(Turkey), where a school buildinghad been destroyed by an earthquakein 1999.June 2006Historic agreement to createthe No.1 Global Steel CompanyCreating the world’s largest steelcompany, Mittal Steel and Arcelorreach an agreement to combine thetwo companies in a merger of equals.The terms of the transaction werereviewed by the Boards of Arcelor andMittal Steel which each recommendedthe transaction to their shareholders.The combined Group, domiciledand headquartered in Luxembourg,is named Arcelor Mittal.Demonstrating the commitmentto extend markets in developingnations, a strategic partnership betweenArcelor Mittal and SNI (SociétéNationale d’Investissement) is concludedconcerning the development of Sonasid.This consolidates and develops theposition of Sonasid on the Moroccanmarket, allowing the company to benefitfrom the transfer of Arcelor Mittal’stechnologies and skills in the LongCarbon Steel product sector.September 2006New dividend policyArcelor Mittal announces newdividend policy, under which it will payout 30% of net income annually.93.7% of Arcelor shareholderstender their shares to Mittal Steel.Arcelor Mittal confirms Value Planup to 2008.December 2006Deals, deals, deals!Arcelor Mittal sells Thüringenlong carbon steel plant to GrupoAlfonso Gallardo for €591 million,as part of Mittal Steel’s commitmentsto the European Commission.Arcelor Mittal and the Governmentof Liberia conclude the reviewof the Mining Development Agreement.With this agreement giving accessto iron ore mining, with capacityof 15 million tonnes a year, the LiberianGovernment and Arcelor Mittal willbe partners in jumpstarting economicrecovery and development for Liberia.The US$1 billion investment willbring around 3,500 direct jobs and15,000 to 20,000 indirect jobs.Arcelor Mittal sells the Italian longcarbon steel production Travi eProfilati di Pallanzeno and San ZenoAcciai to Duferco for €117 million,as part of Mittal Steel’s commitmentto the European Commission.Arcelor Mittal acquires Sicartsa,the leading Mexican long steel producer.Sicartsa is a fully integrated producerof long steel with an annual productioncapacity of about 2.7 million tonnes,and with production facilities in Mexicoand Texas. This combination of Sicartsawith Mittal Steel Lázaro Cárdenasleads to the creation of Mexico’s largeststeel producer with an annual capacityof 6.7 million tonnes.Arcelor Mittal signs a Memorandumof Understanding for the Greenfieldproject in Orissa, India. The aim is toset up steelmaking operations in theKeonijhar District. The integrated steelplant should have a total annual capacityof 12 million tonnes. This would includecaptive mining facilities, captive powersupply, water supply infrastructure andother facilities including setting uptownships for employees.The first slab in the new continuouscaster in Dabrova has been producedand represents a key step of the successfulrestructuring of Arcelor Mittal Poland.Other projects had been achieved earlier,such as the relining of a blast furnacein September 2006, the commissioningof the new colour coating line in HutaFlorina. The start-up of a new hot stripmill in Krakow is foreseen in the firsthalf of 2007.Arcelor Mittal says EBITDA will behigher in 2007 than in 2006.February 2007Recent eventsArcelor Mittal announces its first setof pro forma full year results.Arcelor Mittal signs various agreementswith the State of Senegal in West Africa,to develop iron ore mining in theFaleme region of South East Senegal.With an expected investment ofapproximately US$2.2 billion, the projectwill encompass the development of themine, the building of a new port nearDakar and the development of about750km of rail infrastructure. The mineshould start production in 2011.Arcelor Mittal signs partnership agreementfor a seamless tubemill in Saudi Arabia.

18 Arcelor Mittal Activity Report 2006Global PresenceThe Arcelor Mittal merger has created a steel companywith an unrivalled geographical footprint. Three times thesize of its nearest competitor, Arcelor Mittal has steel plantson four continents and a presence in over 60 countries,enjoying regional leadership in North and South America,Western Europe, Eastern Europe, CIS and Africa.118milliontonnesof steel produced by Arcelor Mittal in 2006.

Arcelor Mittal Activity Report 2006 19US and Canada22%Central and Eastern Europe18%Western Europe34%Latin America09%CIS and Central Asia10%Africa07%Geographical breakdown of Arcelor Mittal production in 2006.

20 Arcelor Mittal Activity Report 2006Board of DirectorsArcelor Mittal’s Board of Directors is composedof 18 members, responsible for the overall supervisionof the company. Twelve of its members were appointedequally by Arcelor and Mittal Steel. There are three shareholderrepresentatives and three employee representatives.The Board is truly international in character.Joseph Kinsch (01), 73, is the Chairmanof Arcelor Mittal’s Board of Directors.At the helm of Luxembourg-basedsteelmaker Arbed, he has been oneof the key consolidators of the worldsteel industry of the last decades,first by reshaping Arbed’s strategy andsteering its growth, notably in Europeand Brazil, then by assuming a significantrole in the three-way merger of Europeansteel companies which resulted in Arcelor,and recently by negotiating a mergerof equals between Arcelor and MittalSteel. Mr. Kinsch joined Arbed in 1961at its Burbach (Saar, Germany) plant.A year later, he moved to the company’sheadquarters in Luxembourg. There,he held various financial (accounting andfinance) and industrial (steel processing)positions. Mr. Kinsch was a memberof the Group’s Management Board from1980 to 1991, became CEO in 1992and Chairman of the Board of Directorsin 1993. In 2002, at the creationof Arcelor, he was chosen to chair theBoard of Directors of the new company.Joseph Kinsch holds a Master degreein Economics and is a Doctor of Lawsh.c. He is the Honorary Consul ofBrazil in Luxembourg. His merits as anentrepreneur have been widely recognisedthroughout the world.Lakshmi N. Mittal (02), 56, is thePresident of the Board of Directorsand Chief Executive Officer of ArcelorMittal. He is the founder of MittalSteel and has been responsible for itsstrategic direction and development.He is widely recognised for the rolehe has played in restructuring the steelindustry towards a more consolidatedand globalised model. He is also anon-executive Director of Mittal Steel SouthAfrica, an executive committee memberof the International Iron and Steel Institute,a member of the Foreign InvestmentCouncil in Kazakhstan, the InternationalInvestment Council in South Africa, theWorld Economic Forum’s InternationalBusiness Council, a Director of ICICI BankLtd and is on the Advisory Board of theKellogg School of Management in theUnited States. At the end of 2006,Mr. Mittal was named Man of the Yearby the Financial Times, BusinessPerson of 2006 for The Sunday Times,Gewinner 2006 for Die Welt,and Newsmaker of the Year for Timemagazine. He was awarded Fortunemagazine’s ‘European Businessmanof the Year 2004’ and was named‘Entrepreneur of the Year’ by the WallStreet Journal in 2004. He was previouslynamed Steel Maker of the Year in 1996by New Steel, a leading industry publicationand was awarded the 8th honoraryWilly Korf Steel Vision Award, the highestrecognition for worldwide achievementin the steel industry. Mr. Mittal hasbeen nominated for the 2007 Dwight D.Eisenhower Global Leadership Award.Vanisha Mittal Bhatia (03), 26,was appointed as a member of theLNM Holdings Board of Directorsin June 2004. Mrs. Vanisha MittalBhatia was appointed to Mittal Steel’sBoard of Directors in December2004. She has a Bachelor of Artsdegree in Business Administrationfrom the European Business Schooland has completed corporate internshipsat Mittal Shipping, Mittal Steel HamburgGmbH and an Internet-based venturecapital fund. She is the daughter ofMr. Lakshmi N. Mittal.Narayanan Vaghul (04), 70, has 49years of experience in the financialsector and has been the Chairmanof Industrial Credit and InvestmentCorporation of India for 16 years andof ICICI Bank Ltd. for the last two years.Prior to that, he was Chairman of theBank of India and Executive Directorof the Central Bank of India. He waschosen as the Businessman of the Yearin 1992 by Business India, a leadingIndian publication, and has servedas a consultant to the World Bank,the International Finance Corporationand the Asian Development Bank.Mr. Vaghul was also a visiting Professorat the Stern Business School at New YorkUniversity. Mr. Vaghul is Chairman ofthe Indian Institute of Finance Management& Research and is also a Board memberof various other companies, including WiproLtd., Mahindra & Mahindra Ltd., NicholasPiramal India Ltd., Apollo Hospitals Ltd.and Himatsingka Seide Ltd.

Arcelor Mittal Activity Report 2006 2101 02 03 04 0506 07 08 09Wilbur L. Ross, Jr. (05), 69, was thefounder of ISG which merged withLNM to create Mittal Steel in 2004.Mr. Ross is the Chairman and ChiefExecutive Officer of WL Ross & Co LLC,a merchant banking firm, a positionhe has held since April 2000. Mr. Rossis also the Chairman and Chief ExecutiveOfficer of WLR Recovery Fund L.P.,WLR Recovery Fund II L.P., Asia RecoveryFund, Asia Recovery Fund Co-Investment,Nippon Investment Partners and AbsoluteRecovery Hedge Fund. Mr. Ross is alsothe general partner of WLR RecoveryFund L.P., WLR Recovery Fund II L.P.,Asia Recovery Fund and Absolute RecoveryHedge Fund. Mr. Ross is also Chairmanof Ohizumi Manufacturing companyin Japan, Chairman of International TextileGroup, International Coal Group and ofMarquis Who’s Who Inc., in the UnitedStates and Chairman of Insuratex Ltd.,in Bermuda. Mr. Ross is a Board memberof the Turnaround Management Association,Nikko Electric Co. in Japan, Tong YangLife Insurance Co. in Korea and of SymsCorp., Clarent Hospital Corp. and NewsCommunications Inc. in the United States.He is also Director of IAC AcquisitionCorporation Ltd. in the United Kingdom,Compagnie Européenne de WagonsSARL in Luxembourg, Oxford Automotivein Denmark and Safety ComponentsInternational in the United States.He is Director of the Japan Societyand of the Yale School of Management.Mr. Ross is also a member of the BusinessRoundtable. Previously, Mr. Ross servedas the Executive Managing Director atRothschild Inc., an investment bankingfirm, from October 1974 to March 2000.Mr. Ross was also Chairman of theSmithsonian Institution National Board.Lewis B. Kaden (06), 64, hasapproximately 38 years of experiencein corporate governance, dispute mediation,labour and employment law and economicpolicy. He is currently Vice Chairmanand Chief Administrative Officer of CitigroupInc. Prior to that, he was a partnerat the law firm of Davis Polk & Wardwell,and served as Counsel to the Governorof New Jersey, as a Professor of Lawat Columbia University and as Directorof Columbia’s Centre for Law and EconomicStudies. He has served as a Directorof Bethlehem Steel Corporation forten years and is currently Chairmanof the Board of Directors of the MarkleFoundation. He is a member of the Councilon Foreign Relations and the moderatorof the Business-Labor Dialogue.Mr. Kaden is a graduate of HarvardCollege and of Harvard Law School.He was the John Harvard Scholar atEmmanuel College, Cambridge Univeristy.François H. Pinault (07), 70, is thefounder and former President of theArtemis Group and PPR. The ArtemisGroup is a €25 billion global investmentholding company including 42% of thelisted company PPR. PPR includes retailbrands, such as FNAC, La Redoute,Le Printemps, Conforama and luxurybrands, such as Gucci Group, whichincludes Gucci, Bottega Veneta, YvesSaint Laurent, Boucheron and Balenciaga.Artemis also owns Chateau Latourvineyard in France and Christie’s auctionhouse. Mr. Pinault also owns insuranceand media businesses and holds minorityshares in the French group Bouygues.Mr. Pinault serves on the Board of Directorsfor Financière Pinault and Artemis.José Ramón Álvarez Rendueles (08),66, has extensive experience inthe financial, economic and industrialsectors. He was former Governorof the Bank of España and Presidentof the Bank Zaragozano. He is Presidentof the Board of Directors of ArcelorEspaña, Peugeot España and PirelliEspaña. He is professor of public financeat the Universidad Autónoma de Madrid,the President of the Prince of AsturiasFoundation and a Director of GestavisíonTelecinco S.A.Sergio Silva de Freitas (09), 63,has 40 years of experience in the financialsector. He is President of the Boardof Directors and of the Audit, Appointmentsand Remunerations Committees of ArcelorBrasil. After several years spent in highranking positions in important financialinstitutions in London and in Washington,he became Senior Vice President of BancoItaù and is now member of the InternationalAdvisory Board of Banco Itaù, Sao Paulo,Brazil. He has a Bachelor’s degree inElectrical Engineering from Escola Nacionalde Engenharia da Universidade Brasil.

22 Arcelor Mittal Activity Report 2006Board of DirectorscontinuedGeorges Schmit (10), 53,is Director General at the Ministryof the Economy and ForeignTrade and a Member of the Boardof Economic Development of theGrand-Duchy of Luxembourg. He isalso Vice Chairman of the SociétéNationale de Crédit et d’Investissement(SNCI) and of the « Entreprise desPostes et Télécommunications »,Luxembourg and a Director of SESGlobal S.A., of Banque et Caissed’Epargne de l’Etat, Luxembourg,and of Paul Wurth S.A. Since 2000,he has been the representative ofLuxembourg on the Enterprise PolicyGroup, an advisory body to the EuropeanCommission. Mr. Schmit holds a Masterof Arts degree in Economics from theUniversity of Michigan.Edmond Pachura (11), 72, has40 years of experience in theindustrial sector. He is Chairmanof the Union des Négociants en AciersSpéciaux (UNAS), Paris. Previously,he was Director of Renault and CEOof Sollac. Mr. Pachura has also beena member of the Board of Directorsof Charbonnages de France since 1997and of the SNCF (Société Nationaledes Chemins de Fer) since 1998.Michel Angel Marti (12), 59,is a representative of theemployees. He is former Secretaryof the Conféderation FrançaiseDémocratique du Travail (CFDT)union, Broye, France.Manuel Fernández López (13), 60,is a representative of the employees.He is also Secretary Generalof the Metal, Construcción y Afinesde UGT union; Federación Estatal(M.C.A.-U.G.T.); Madrid, Spain.Jean-Pierre Hansen (14), 58,is Vice Chairman of the ExecutiveCommittee and Senior Executive VicePresident of Suez, and is responsiblefor Operations. He entered theelectricity and gas sector in 1975.Since 1 January 2005, Mr. Hansenhas been Vice Chairman and CEOof Electrabel, a role he previously heldfrom 1992 to March 1999. Since March1999, he has also held the positionof Chairman of the Executive Committeeof Electrabel. He is also CEO ofSuez-Tractebel, Chairman of Fabricomand Director of Distrigas, Fluxys, AGBARand ACEA, Vice Chairman of the Federationof Enterprises in Belgium, and AssociateProfessor of Economics at the UCLand at the École Polytechnique (Paris).Mr. Hansen holds a Master’s degreein Electrical Engineering, a degreein Economics and a Doctoratein Engineering.

Arcelor Mittal Activity Report 2006 2310 11 12 13 1415 16 17 18John O. Castegnaro (15), 61,is a representative of the employees.He is a member of the LuxembourgParliament and Honorary Chairmanof trade union OnhofhängegeGewerkschaftsbond Lëtzebuerg (OGB-L).Antoine Spillmann (16), 43, is arepresentative of Corporación JMACB.V. After several years spent in differentbanks, mainly in the United Kingdom,he is now Asset Manager and executivepartner at the firm Bruellan, an assetmanagement company based in Geneva.H.R.H. Prince Guillaume de Luxembourg(17), 43, worked for six monthsat the International Monetary Fundin Washington, US and spent two yearsat the Commission of EuropeanCommunities in Brussels. He studiedat Oxford University and graduated fromGeorgetown University in the United States.Romain Zaleski (18), 73, graduatedfrom the Ecole Polytechniqueand from the Ecole des Mines de Paris(Mining School). He then servedas a technical consultant in the publicservice, in particular at the Ministryof Industry. After leaving the public service,he was appointed as a Managing Directorin several groups related to industryand to banking. In 1984, he settled in Italyand dedicated himself to the reorganisationand the development of Carlo TassaraSpA group, a leading company operatingin the sectors of heavy industry, steelindustry, ironworks, metallurgy andproduction of electric power. He led theCarlo Tassara group to its current position,with the holding of interests in thebanking sector in Mittel, Banca Intesa,Banca Lombarda and Generali, as wellas in the industrial sector, in Eramet andin Mittal Steel. Managing Director ofthe Carlo Tassara group and of BancaLombarda, one of the top ten Italian banks,from 2003 to 2005, Mr. Zaleski wasalso Chairman of Italenergia Bis, a holdingcompany of the Edison group, the secondlargest producer of electric power in Italy.

24 Arcelor Mittal Activity Report 2006The Group Management BoardThe strategic direction of the business is the responsibilityof a six-strong Group Management Board (GMB), formed in August 2006.The GMB members were appointed by the Board of Directors,and is headed by Lakshmi N. Mittal as Chief Executive. Its compositionreflects the Group’s new structure, which is divided into five key segments.

Arcelor Mittal Activity Report 2006 25Roland Junck, Member of the GroupManagement Board, Advisor to the CEORoland Junck was previously a memberof the Group Management Boardof Arcelor with responsibility for theglobal Long Carbon Steel and Wire Drawingbusiness and for China. He started hiscareer with Arbed in 1980 in the rollingmills at Dudelange, before moving toEsch-Schifflange in 1985. In 1993,Mr. Junck was named General Managerof TrefilArbed Bissen, being appointedManaging Director in 1996. He was namedSenior Vice President of Aceralia in1998 and was a member of the ArbedGroup Management Board from 1999to 2002 when he was appointed SeniorExecutive Vice President of the newlycreated Arcelor. Mr. Junck graduatedfrom the Federal Polytechnic in Zurichand earned an MBA from Sacred HeartUniversity of Luxembourg.Aditya Mittal, CFO, Member of theGroup Management Board, Responsiblefor Flat Products AmericasAditya Mittal is Chief Financial Officerof Arcelor Mittal with additionalresponsibility for Flat Products Americasand for Merger and Acquisitions.Prior to the merger to create ArcelorMittal, Aditya Mittal held the positionof President and CFO of Mittal Steel fromOctober 2004 to 2006. He joined MittalSteel in January 1997 and has held variousfinance and management roles withinthe company. In 1999, he was appointedHead of Mergers and Acquisitionsfor Mittal Steel. In this role, he ledthe company’s acquisition strategy,resulting in Mittal Steel’s expansion intoCentral Europe, Africa and the UnitedStates. These acquisitions includedKryvorizhstal in Ukraine, Polskie Huty Staliin Poland, Nova Hut in Czech Republic,Sidex in Romania, Annaba in Algeria,Iscor in South Africa, and InternationalSteel Group in the US. In addition tohis Merger and Acquisition responsibilities,Aditya Mittal was involved in post-integration,turnaround and improvement strategies.This led to Mittal Steel emerging asthe world’s largest and most globalsteel producer, growing its steelmakingcapacities fourfold.As CFO of Mittal Steel, he also led MittalSteel’s offer for Arcelor to create thefirst 100 million tonne plus steel company.Aditya Mittal holds a Bachelor’s degreeof Science in Economics withconcentrations in Strategic Managementand Corporate Finance from the WhartonSchool in Pennsylvania from which hegraduated magna cum laude. Aditya Mittalis the son of Mr. Lakshmi N. Mittal.Malay Mukherjee, Member of the GroupManagement Board, Responsible forAsia & Africa, Mining, StainlessMalay Mukherjee has over 30 yearsof experience in a variety of technicaland commercial functions in the steelindustry, including iron ore mining, projectimplementation, materials managementand steel plant operations. He joinedthe LNM Group in 1993 from the SteelAuthority of India, where his last positionwas as Executive Director (Works) at theBhilai Steel Plant, the largest integratedsteel plant in India, with a productioncapacity of approximately four milliontonnes. Mr. Mukherjee has a Master’sdegree in Mining from the USSR StateCommission in Moscow and a Bachelorof Science degree from the Indian Instituteof Technology in Kharagpur, India.Mr. Mukherjee has completed an advancedManagement Programme conductedby the Commonwealth Secretariat in jointassociation with University of Ottawa,Canada and the Indian Institute ofManagement, Ahmedabad. Mr. Mukherjeejoined Ispat Karmet in 1996 from IspatMexicana where he was Managing Director.He joined Ispat Europe as Presidentand CEO in June of 1999. Formerly thePresident and Chief Operating Officerof Ispat International N.V., Mr. Mukherjeebecame Chief Operating Officer ofMittal Steel in October 2004. Mr.Mukherjee is a recipient of the MECONAward from the Indian Institute of Metals.Gonzalo Urquijo, Member of the GroupManagement Board, Responsiblefor Long Products, Distribution andWire DrawingGonzalo Urquijo, previously SeniorExecutive Vice President and ChiefFinancial Officer of Arcelor, was responsiblefor Finance, Purchasing, IT, LegalAffairs, Investor Relations, Arcelor SteelSolutions & Services, and other activities.Mr. Urquijo also held several otherpositions within Arcelor and in this sector,including Deputy Senior Executive VicePresident and Head of the functionaldirectorates of distribution. Until thecreation of Arcelor in 2002, when hebecame Executive Vice President ofthe Operational Unit South of the FlatCarbon Steel sector, Mr. Urquijo was CFOof Aceralia. Between 1984 and 1992,he held a variety of positions at Citibankand Crédit Agricole before joining Aristrainin 1992 as CFO and later becomingCo-Chief Executive Officer. Mr. Urquijograduated in Economics and PoliticalScience from Yale University and holdsan MBA from the Instituto de Empresain Madrid.Michel Wurth, Member of the GroupManagement Board, Responsiblefor Flat Products Europe, Global Auto,Plates and R&DMichel Wurth was previously Vice Presidentof the Group Management Board andDeputy CEO of Arcelor, and was responsiblefor Flat Carbon Steel Europe & Auto,Flat Carbon Steel Brazil, CoordinationBrazil, Coordination Heavy Plate, R&Dand NSC Alliance. The merger of Aceralia,Arbed and Usinor leading to the creationof Arcelor in 2002 saw Mr. Wurth appointedas Senior Executive Vice President andCFO of Arcelor, with responsibility overFinance and Management by Objectives.Mr. Wurth joined Arbed in 1979 and helda variety of positions, including Secretaryof the Board of Directors, Head of theArbed subsidiary Novar and CorporateSecretary, before joining the Arbed GroupManagement Board and becoming ChiefFinancial Officer in 1996. He was namedExecutive Vice President in 1998.Mr. Wurth holds a Law degree from theUniversity of Grenoble, a Political Sciencedegree from the Institut d’Etudes Politiquesde Grenoble and a Master of Economicsfrom the London School of Economics.From left to right:Malay Mukherjee,Aditya Mittal,Roland Junck,Lakshmi N. Mittal,Gonzalo Urquijo,Michel Wurth.

26 Arcelor Mittal – Activity Report 2006Management CommitteeAll GMB members also sit on a strong Management Committee,active since early September 2006 and responsible for regionalor sectoral organisations and Group-level functions such as Purchasing,Marketing and Performance Enhancement. The new structure is bothlean and flat. It aims to create an organisation that is at once inventiveand adaptable, with clear accountability at every level. Above all,it aims to foster an entrepreneurial spirit that will keep Arcelor Mittalahead of its competitors.Bhikam AgarwalExecutive Vice President,Responsible for Financial Controllingand ReportingBhikam Agarwal has been the ManagingDirector, Controlling of Mittal Steeland has over 30 years of experiencein steel and related industries. He hasheld various senior executive positionswithin Mittal Steel and was previouslyChief Financial Officer after its formationat Ispat International. He has beenresponsible for the financial strategyof Mittal Steel and has been a coordinatorof its prior activities in the capital markets.Mr. Agarwal has also led the finance andaccounting functions of Ispat Internationalacross all its operating subsidiaries.Roeland BaanExecutive Vice President,Responsible for South and Central Africaand Pipes & TubesRoeland Baan has been Chief ExecutiveOfficer of Mittal Steel Europe. He joinedMittal Steel from the global conglomerateSHV Holdings, which lists metalsrecycling among its non-core activities.There he spent eight years as a memberof the Energy Divisions ExecutiveCommittee and was responsible fordeveloping and executing its strategy acrossa number of key regions, including Europe,South America and the Mediterraneanrim. Prior to that, Mr. Baan spent 16 yearswith Shell, where he held a numberof positions worldwide. He has a Master’sdegree in Economics from Vrije Universiteitin Amsterdam.Gilles BiauExecutive Vice President,Human Resources Group Co-HeadGilles Biau was Arcelor’s Executive VicePresident Human Resources, sinceJuly 2005. A engineering graduateof the Ecole Supérieure d’Electricitéof Paris, he has held various positionswithin Arcelor’s and Usinor’s Flat Carbonbusiness, including as Head of its Centreand Wallonia Operational Units, from 2003to 2005, and as Industrial OperationsManager of Arcelor’s Flat Carbon Sectorfrom 2002 to 2003. Before that, hewas in charge of industrial operationsat Sollac, the Flat Carbon unit of Usinor,primarily at its Florange (France) unit.He joined Sollac in 1971.Alain BouchardExecutive Vice President,Responsible for Purchasing Functionon Worldwide BasisAlain Bouchard has been ArcelorExecutive Vice President Purchasingsince 2004. Prior to that, he was incharge, at Arcelor and Usinor, of theCockerill-Sambre works in Liège (Belgium)and at Sollac Lorraine. From 1993to 1999, he held various positionsin production planning, customer services,information systems-information technology,and reengineering of support functionswithin Usinor’s Flat Carbon Steelbusiness in Paris. From 1989 to 1993,he worked at Usinor’s Fos-sur-Mer plant,after joining the IRSID Steel Researchand Development Institute in 1973.Mr. Bouchard is an IT engineer, a graduateof the Ecole Nationale Supérieured’Informatique et MathématiquesAppliquées de Grenoble, and a Physicsengineer, with a degree from EcoleNationale Supérieure de Physiquede Grenoble.

Arcelor Mittal Activity Report 2006 27José Armando CamposExecutive Vice President,Responsible for Flat South AmericaJosé Armando Campos was the Presidentand officer in charge of the Flat SteelBusiness Area at Arcelor Brasil andPresident and CEO of CST since 1997.Prior to that, he worked in miningdevelopment and metallurgical areasat the Companhia Vale do Rio Docefrom 1974 to 1992. Mr. Camposhas been a member of the BrazilianMetallurgy and Materials Society since1972 and the Board of Directors ofthe Brazilian Business Council forSustainable Development. Mr. Camposis also a member of the Board of Directorsof Acesita. He is a Mining Engineer,with a degree from the Federal Universityof Ouro Preto.Narendra ChaudharyExecutive Vice President,Responsible for Carbon Steel Asia,Mediterranean, Black Sea BasinNarendra Chaudhary was appointedCEO of Mittal Steel’s Ukrainian operationin January 2006. Prior to that,Mr. Chaudhary was Director, Operationsand Maintenance for Mittal Steel. Mr.Chaudhary joined Mittal Steel in 1993at its Mexican operations and has helda number of positions at Mittal Steel sincethen, including as CEO of Mittal SteelGalati in Romania and CEO of Mittal Steel’soperations in Kazakhstan. Mr. Chaudharypossesses over 39 years of experiencein a variety of technical and managerialfunctions in the steel industry. He workedat Steel Authority of India Limitedplants in various capacities for 28 years.Mr. Chaudhary has a Bachelor’s degreein Engineering from Bihar Instituteof Technology, India.Davinder ChughSenior Executive Vice President,Responsible for Shared ServicesDavinder Chugh, previously CEO of MittalSteel South Africa, has over 25 yearsexperience in the steel industry, particularlyin materials purchasing, logistics,warehousing and shipping. Mr. Chughalso was Commercial Director at MittalSteel from 2002 to 2006. Before joiningMittal Steel South Africa, he was VicePresident of purchasing at Mittal SteelEurope. Mr. Chugh has been with thecompany since 1995 and successfullyintegrated the materials managementfunctions at newly acquired plants inHamburg, Duisburg, France, Romaniaand Algeria. Prior to this, he held severalsenior positions at the Steel AuthorityIndia Limited in New Delhi, India. He holdsDegrees in Science and Law and has aMaster’s degree in Business Administration.Christophe CornierExecutive Vice President,Responsible for Flat EuropeChristophe Cornier has been responsiblefor Arcelor’s Flat Products activities inEurope and for its worldwide automotivesector since December 2005, when hewas appointed member of the Arcelor’sManagement Committee. In June 2005,he was appointed Head of Arcelor’s ClientValue Team. At the creation of Arcelorin 2002, he was named Executive VicePresident of FCS Commercial Auto. Beforethat, he was CEO of Sollac Méditerranée.In 1998, he was appointed CEO of LaMagona, after joining Sollac Packagingas Managing Director in 1993. In 1985he joined Usinor, where he was BusinessDevelopment Director and Chief Controllerof Sollac. He began his career within theFrench Ministry of Industry, which he left asa Deputy Director. Mr. Cornier is a graduateof the Ecole Polytechnique and the Ecoledes Mines, in Paris.Philippe DarmayanExecutive Vice President,Responsible for Arcelor Mittal SteelSolutions & Services (AM3S)Philippe Darmayan has been ExecutiveVice President in charge of Arcelor SteelSolutions and Services (A3S) sinceJanuary 2005. Before that, he wasCEO of Ugine & ALZ. A graduate of Frenchbusiness school HEC, Philippe Darmayanjoined Arcelor to lead the transformationof Ugine & ALZ in 2002. Before,he held various management positionsin the aluminium businesses of PechineyGroup, which he joined in 1996, andwas a plant Director and ManagingDirector of Franco-Belge de Fabrication deCombustibles, a subsidiary of Framatome.Bernard FontanaExecutive Vice President,Responsible for Automotive WorldwideBernard Fontana joined Arcelorin September 2004 as FCS ProgramOffice Executive manager and wasappointed as Arcelor Flat Carbon EuropeExecutive Vice President/People andDevelopment in July 2005. Prior to that,he worked at the Chemical GroupSNPE for 18 years, including as SNPE’sNorth American Director and as ExecutiveVice President of SNPE. Mr. Fontanagraduated from the Ecole Polytechniqueand from the Ecole Nationale Supérieuredes Techniques Avancées in Paris.

28 Arcelor Mittal – Activity Report 2006Management CommitteecontinuedJean-Yves GiletExecutive Vice President,Responsible for Stainless Steel WorldwideJean-Yves Gilet has been advisor tothe CEO with responsibility for Arcelor’sStainless Steel business worldwidesince December 2005, in chargeof preparing and implementing thestrategic reorganisation of this business.Prior to that, he was Senior ExecutiveVice President of Arcelor, in chargeof the Stainless Steel Sector, a positionhe held since the creation of Arcelorin 2002. In 1999, he became a memberof the Usinor executive committee.In 1998, he was named Chairman andCEO of Acesita in Brazil. He joined Usinorin 1990 and, between 1991 and 1998,he held management positions at Imphy,Ugine-Savoie and Sprint Métal Stainlessbusinesses. Prior to that, he was CabinetHead for the Regional Developmentand Minister in France. Mr. Gilet,an engineering graduate of the EcolePolytechnique (Corps des Mines),began his career in 1981 at the IndustryMinistry, before joining DATAR, the regionaldevelopment agency.Sudhir MaheshwariExecutive Vice President,Responsible for Finance and M&ASudhir Maheshwari was previously theManaging Director, Business Developmentand Treasury of Mittal Steel and has20 years of experience in steel and relatedindustries. He was the Chief FinancialOfficer of LNM Holdings from January2002, until its merger with IspatInternational in December 2004. He hasplayed an integral role in all the recentacquisitions by Mittal Steel, includingturnaround and integration activities,and in various corporate financeand capital market projects, includingthe initial public offering in 1997.He also held the positions of Chief FinancialOfficer at Mittal Steel Europe, Mittal SteelGermany and Mittal Steel Point Lisas,and was Director of Finance andMergers & Acquisitions at Mittal Steel.Mr. Maheshwari has worked for MittalSteel for 18 years. Mr. Maheshwariis an Honours Graduate in Accountingand Commerce from St Xavier’s College,Calcutta and a Fellow Member of theInstitute of Chartered Accountants and theInstitute of Company Secretaries in India.Carlo PanunziExecutive Vice President,Responsible for Long AmericasCarlo Panunzi was previously SeniorExecutive Vice President of ArcelorBrasil, in charge of Long Productsand Distribution. In 2002, CarloPanunzi became the President of BelgoMineira, a company he had joinedin 1999 and where he was, among otherpositions, Managing Directorof the Piracicaba plant in the Stateof São Paulo. Before that, he heldseveral positions at Arbed, which hejoined in 1973 as an engineer at theDifferdange plant’s rolling line.Michael PfitznerExecutive Vice President,Responsible for Commercial CoordinationMichael Pfitzner joined Mittal Steel asDirector of Marketing in February 2006.He has over 25 years of extensive industryexperience in commercial functionswith several steel companies namelyMannesmann, Saarstahl, ThyssenKruppStainless and Salzgitter. At Salzgitter,where he worked for nearly 5 years,Mr. Pfitzner was a member of theExecutive Board responsible for Salesand Distribution. Mr. Pfitzner hasa degree in Economics from the Universityof Bonn, Germany.

Arcelor Mittal Activity Report 2006 29Gerhard RenzExecutive Vice President,Responsible for Long EuropeGerhard Renz has been theChief Operating Officer of Mittal SteelEurope and has over 32 yearsof experience in the steel industry.Mr. Renz formerly worked as theManaging Director of Mittal SteelHamburg. He is a Board Memberof Verein Deutscher Eisenhüttenleute,Wirtschaftsvereinigung Stahl andthe European Iron and Steel Institute.He holds a Bachelor’s degreein Engineering.Michael G. RippeyExecutive Vice President,Responsible for USAMichael Rippey was elected in August2006 as President and Chief ExecutiveOfficer of Mittal Steel USA. Previously,he had been the Mittal Steel’s ExecutiveVice President, Sales & Marketing, sinceApril 2005, with direct responsibility forall sales and marketing of light flat-rolledand plate products. Mr. Rippey had beenExecutive Vice President, Commercial,and Chief Financial Officer at Ispat Inland,since January 2004 and an Officerof Mittal Steel USA since June 1998.He has a Bachelor’s degree in Marketingfrom Indiana University, Bloomington;a Master’s degree in Banking and Financefrom Loyola University, Chicago; anda Master of Business Administration fromthe University of Chicago.Lou SchorschExecutive Vice President,Responsible for Flat AmericasLou Schorsch was elected in August2006 as President and Chief ExecutiveOfficer of Flat Americas. Previously,he had been Chief Executive Officer ofMittal Steel USA since the merger betweenMittal Steel and ISG in October 2004.Prior to that, Dr. Schorsch was thePresident and Chief Executive Officerof Ispat Inland where he was responsiblefor significant improvements in itsoperational performance. Dr. Schorschhas over 25 years of experience inconsulting and managerial roles primarilyrelating to the steel industry. Prior to joiningIspat Inland in October 2003, he heldvarious senior positions in the consultingand e-commerce sectors. Most recently,he was President and Chief ExecutiveOfficer of GSX.Com and Principal atMcKinsey & Company, where he workedfrom 1985 until 2000. While at McKinsey,he was a co-leader of its metalspractice. Dr. Schorsch has publishednumerous articles in such publicationsas Business Week and Challenge andhas also co-authored a book on steelentitled “Upheaval in a Basic Industry”.Bill ScottingExecutive Vice President,Responsible for Performance EnhancementBill Scotting joined Mittal Steelin September 2002 to lead itsPerformance Enhancement activities.Formerly an Associate Principal at McKinsey& Company, Mr. Scotting has 20 yearsof experience in the steel industryin technical, operations managementand consulting roles. He has also heldpositions at BHP Steel, Pioneer Concrete(UK), Mascott Partnership and CRUInternational. Mr. Scotting holds a Bachelorof Science (Metallurgy) degree fromthe University of Newcastle in Australia,where he was awarded the AustralasianInstitute of Metallurgy Prize for Metallurgy,and an MBA (with distinction) from WarwickBusiness School in the United Kingdom.André van den BosscheExecutive Vice President,Responsible for MarketingAndré van den Bossche has beenArcelor’s Executive Vice PresidentCommercial Worldwide Optimisation since2005. Prior to that, he was ManagingDirector of Arcelor’s Flat Carbon Steelcommercial organisation from 2002to 2005, Managing Director at theAceralia Sidstahl Ibérica and Sidstahlsales organisations, from 1995 to 2001,and Sales Director at TradeArbedLuxembourg from 1986 to 1995.At Sidmar (Ghent), which he joinedin 1970, he was Vice President of theCommercial and Customer RelationsDepartment, General Manager of thecold rolling mill and production andmanagement engineer at the cold rollingmill. Mr. van den Bossche is a civilengineer graduated from the Universitiesof Louvain and Ghent.Inder WaliaExecutive Vice President,Responsible for Human ResourcesInder Walia joined Mittal Steelin 2000 and since then has beenresponsible for the developmentand implementation of human resourcesstrategies. Mr. Walia has held variouspositions in human resources at ModiCorp and HCL Hewlett Packard. He has24 years of experience in human resourcespositions. He has a post-graduate degreein Human Resources from Tata Instituteof Social Sciences, Mumbai, India.He is also an active member of varioushuman resource committees.

30 Arcelor Mittal Activity Report 2006Household AppliancesWith the advent of tough recycling rules for electric and electronicequipment, steel’s capacity for recycling makes it an ever moreattractive material for household appliances, a market thatis growing in some regions by as much as 12%. Arcelor Mittalhas led the way with new surface finishes, stainless substitutesand fingerprint-resistant steel.12 %

Arcelor Mittal Activity Report 2006 31

32 Arcelor Mittal Activity Report 2006Company Profileand Global Business StrategyThe Arcelor Mittal merger marks the most decisive step in theconsolidation of the world steel industry, but it is the continuationof a consistent strategy aimed at creating a business with cost leadership,sustained profitability and cash generation through the economic cycle.With unparalleled access to developing markets, Arcelor Mittal combinesstability and sustainability with substantial growth potential.

Arcelor Mittal Activity Report 2006 33A consistent strategy is driving ArcelorMittal. That strategy has three dimensions:• Product diversity• Integrated business model• Geographic reachThe strategy has proved successfulin creating one of the world’s lowestcost and highest margin steelmakers –one demonstrating sustained profitability,reduced risk and substantial growthopportunities. The Arcelor Mittal mergermarks one more step along that path.Product diversity – reducing riskArcelor Mittal is the only produceroffering the full range of steel productsand services. From commodity steelto value-added products, from longproducts to flat, from standard to specialtyproducts, from carbon steel to stainlesssteel and alloys, Arcelor Mittal offersa complete spectrum of steel products –and supports it with continuous investmentin process and product research.Product diversity is important in tworespects. First, the requirementsof mature and developing markets differ.Steel consumption in mature economiesis weighted towards flat products and highervalue-added mix. In developing economies,there is greater demand for long productsand commodity grades. Second, a broadpresence across all product areas providesa natural hedge against volume fluctuationsin particular countries or market segments.Together with geographical diversity,product breadth also reduces the impactof price cyclicality. Price risk is furtherreduced by the volume of steel ArcelorMittal sells on long-term contract. Around35% of flat carbon output is sold undercontracts of a year or longer. In addition,one-third of long products in Europe aresold under scrap surcharge indexation.With its leadership position in NorthAmerica and Europe, the company alsoenjoys high exposure to stable markets.Value-added and specialty productsrepresent about 60% of Group shipments.Arcelor Mittal will continually seek to growthe value-added proportion of its productmix over time as demand increases forthese products in emerging countries.This will be achieved through continuedinvestment in product enhancement atexisting plants, new projects in high-growthmarkets and acquisitions that reinforceand expand product leadership and offerhigh synergy potential.Integrated business model – increasingthe sustainability of profitsArcelor Mittal is not only a steel producerbut also an integrated metals and miningoperation. At the other end of the valuechain, it has a powerful distributionarm which transforms and trades finishedproducts. Upstream and downstreamintegration increases the sustainabilityof profits by allowing a steel companyto capture opportunities wherever theyarise in the value chain.Upstream integration allows steelcompanies to hedge against raw materialprice fluctuations. Arcelor Mittal’s strategyis to expand its already substantial captiveresources of iron and coal to increaselevels of raw material self-sufficiency.Major investments are underway to expandiron ore output from existing mines – mostnotably in Ukraine. In addition, since themerger, Arcelor Mittal has announced twosignificant new initiatives:• A new mining development agreementwith the Government of Liberiathat paves the way for a 15 milliontonnes a year iron ore mine.• Agreements with the State of Senegal inFebruary 2007 to develop a 750 milliontonne iron ore resource in the Falemeregion and build associated rail and portinfrastructure at a cost of US$2.2 billion.Downstream integration, through theownership and management of distributionchannels, allows steel companies to capturea greater share of value-added activities,particularly for high-end customers,such as automotive manufacturers,that are outsourcing more and more oftheir operations. It also brings steel makerscloser to their end customers, giving thembetter market intelligence.That, in turn, allows them to bettermanage inventories in the supply chainto reduce volatility and improve workingcapital management.Finally, captive distribution channelsprovide a buffer against falling demandduring an economic downturn – particularlyin Europe where steelmakers tendto own distribution channels.Geographic reach – delivering costleadership and growthWith an industrial network spanning27 countries on four continents, andrepresentation in a total of 60 countries,Arcelor Mittal benefits from uniquegeographical diversification. Approximately25% of production is from plants thatfigure among the lowest-cost producersin the world, giving the company theregional cost leadership that is essentialto ensuring profitability throughoutthe economic cycle. This geographicalbreadth is a hedge against regionalprice fluctuations.Arcelor Mittal is committed to maintainingthat cost leadership. In the short-term,that will be achieved by realisingthe maximum synergies – in purchasing,marketing and trading – from the merger.Over the longer term, the focus willbe on continuing to use scale and globalpresence to achieve greater productionefficiencies, operational synergiesand cost savings across the business.The Group’s Western Europeanand US operations are among themost productive in the steel industry.Arcelor Mittal is embarking on a five-yearprogramme designed to bring a numberof its plants sited in emerging economies,and acquired over recent years, up tothe same standard.While the worldwide breadth of ArcelorMittal’s sales reduces its exposureto wide price or demand fluctuationsin any one market, its leading positionin Brazil, Mexico, Central and EasternEurope, Africa and Central Asia, enablesit to benefit from the anticipated stronggrowth in domestic steel demand amongdeveloping countries. In the US market,for instance, the spot price of hotrolled coil fluctuated by as much as40% between ealy 2004 and early2007 - almost twice the rate offluctuation witnessed in the averagebase price for all US steel products.

34 Arcelor Mittal Activity Report 2006Company Profileand Global Business StrategycontinuedThe Group is now in a unique position to builda sustainable model for the future and becomethe benchmark for the global steel industry.Arcelor Mittal is leading theconsolidation process in the worldsteel industry. With a reputationfor producing high-quality steel productsfor the most demanding applications,the Group benefits from a strong marketposition with high-end customers.

Arcelor Mittal Activity Report 2006 35Key strategic initiativesDelivering planned merger synergies andachieving full organisational integrationThe major focus of activity in the shortto medium term is on capturing plannedmerger synergies worth US$1.6 billiona year by 2008. Those synergies arisein three principal areas: manufacturingand process optimisation, marketingand trading, and purchasing. Quick wins arealready evident from cross-selling, betterlogistics, exchange of expertise and bestpractice, and increased internal sourcingof slabs and semi-finished products.Synergy targets allocated to eachbusiness segment have been validatedon a bottom-up basis by integrationtaskforces and incorporated in 2007budgets. Around three-quarters of the 2008target is already covered by action plans.Taskforces and business units are finalisingmilestones and plans for the remainder.Integration is on schedule. A new,deliberately flat organisational structurehas been in place since December 2006.Human Resources policies are beingfinalised and implemented. The integrationprocess is expected to be 80% completeby the end of the second quarter of 2007.The new structure will then be reviewedand modifications made if necessaryto ensure it delivers the desired objective:a global but lean organisation andhomogeneous design between entities.Capturing market growth potentialin developing countriesThe steel markets of Central and EasternEurope (CEE) are forecast to grow atcompound annual growth rates rangingbetween 4.6% and 6.7% over the nextfour years as per capita consumptionof steel accelerates from current low levels.To capture that growth, the Group plansboth to leverage its strong asset basein the region and fast-track the expansionof Arcelor Mittal Steel Services andSolutions (AM3S), its distribution andservice centres business.A major investment programme to expandthe company’s low-cost operations inemerging markets is underway (see below).In addition, since the merger, Arcelor Mittalhas announced a number of new initiatives:• The US$1.4 billion acquisitionof Sicartsa, the leading Mexican longsteel producer with annual productionof around 2.7 million tonnes.The combination of Sicartsa withArcelor Mittal’s existing Mexicanbusiness, Lázaro Cárdenas, offerssignificant synergy potential and theopportunity to leverage the Group’sexpertise in value-added products.• The signing of a Memorandum ofUnderstanding to build a 12 milliontonne capacity greenfield steel plantin Orissa, India.• A joint venture with the Bin JarallahGroup of companies to constructa state-of-the-art seamless tube millat Jubail Industrial City in SaudiArabia. The mill will have a capacityof 500,000 tonnes a year.A US$1 billion investment programmeat the CEE mills aimed at enhancingproduct quality and mix, and improvingefficiency and productivity, is well advanced.Not only will this position help Arcelor Mittalto satisfy rising demand born of strongGDP growth in these countries butit will enable the company to meetthe anticipated trend towards moresophisticated products – as, for instance,auto manufacturers increasingly shiftproduction from Western to Eastern Europe.The biggest element of the investmentprogramme is in Poland, where themodernisation of a wire rod mill andthe construction of a new colour coatingline were completed in 2006. A newcontinuous casting line is due to becommissioned in the first quarter of 2007.A new hot strip mill will be commissionedin the second quarter of the year.The second element of the plan – tofast-track the expansion of AM3S in CEEcountries – will be achieved through a mixof downstream integration, organic growthand acquisitions. AM3S’s combination ofdistribution and service centres will delivernew commercial reach to complementthe Group’s strong production base in theregion. The initial focus of expansion will bethe Polish market, where AM3S will targetthe hot rolled and cold rolled sheet market(which is expected to grow by 20% over theperiod to 2010) and expand its distributionof long products and tubes.Consolidating leading position in high-endsegments in mature economies to builda global customer platformWith a reputation for producing high-qualitysteel products for the most demandingapplications, the Group benefits froma strong market position with high-endcustomers. As a consequence of themerger, it now enjoys a leading positionin the mature economies of North Americaand Western Europe.Many customers in the automotive,electrical and appliance manufacturingindustries are becoming increasingly globalin their activities. As such, they valuea supplier that is capable of deliveringthe same products everywhere.Automotive manufacturers, for example,can significantly reduce the cost ofdeveloping moulds if they can use globallythe same grades of steel in all their plants.With the company’s much expandedpresence in developing economies,there is a strong platform from whichto support customers in their worldwideproduct development programmes.As local market needs change, ArcelorMittal will increasingly transfer the capabilityfor manufacturing high-end products toits operations in the developing economies.Expansion of low-cost facilitiesin emerging marketsFacilities in Brazil, Mexico, South Africa,Ukraine and Kazakhstan rank amongthe most cost-competitive in worldsteelmaking, benefiting from low energyand labour costs and privileged access toraw materials. The brownfield expansionof all these operations – at relativelylow cost – is planned to lift productionby approximately 9.5 million tonnesa year by 2008.In Brazil, CST, the world’s largest supplierof slab steel, is engaged in an expansionprogramme that will lift capacity by2.5 million tonnes a year. This followsa major increase in capacity in 2006.In South Africa, upstream expansionat both the Newcastle and Vanderbijlparkfacilities is set to provide an additional2 million tonnes of liquid steel productionover the next two to three years, to bedirected equally towards flat and long steelapplications. At Newcastle, this will beachieved through a reline of Blast FurnaceN5 and increased scrap melting capacity.At Vanderbijlpark, projects includethe reline of Blast Furnace D, additionalDRI capacity and the installation of anadditional sinter strand.Highlights of the expansion at Kryviy Rih,in Ukraine, are a US$90 million investmentin a new billet caster and wire rod millupgrade. These investments together withmining de-bottlenecking will allow capacityto increase from 7 million tonnes to 10million tonnes. Around 450,000 tonnesof long product output will be upgradedto value-added rod and bar. In Kazakhstan,major investments in the upstreamoperations were completed last year.De-bottlenecking work continues to allowthe plant to take maximum advantageof adjacent captive iron ore and coal.Further investments are planned in newcoating facilities, a new billet caster anda bar mill. Total production from Kazakhstanis set to rise from around 5 million tonnesa year to 6.5 million tonnes by 2008.The product mix will benefit from anadditional 570,000 tonnes of cold rolledcoil, 130,000 tonnes of galvanised,160,000 tonnes of tin plate and 80,000tonnes of colour-coated.Capturing growth in sub-Saharan AfricaArcelor Mittal continues to look atopportunities to build on its marketleadership on the African continentto capture anticipated growth in steeldemand in sub-Saharan Africa. In particular,the Group will investigate the scopeto establish a presence in East Africawhere it could leverage upstreamcapabilities by installing local rolling millfacilities. These would be fed with semisproduced at the company’s plant in Ukraine.Enhancing Research and Developmentleadership to drive innovation and growthWith 13 major research centres inEurope, the US and Canada, ArcelorMittal possesses an R&D capability uniquein the steel industry. The Group willcontinue to invest in R&D to continuouslydeliver the high-end products keycustomers require.

36 Arcelor Mittal Activity Report 2006Health and SafetyArcelor Mittal sets Health and Safety above all priorities,and for the entire Group. A strong safety culture is instilledat every level and is supported by a robust set of safetystandards and a system of performance monitoring thataims to reduce accident levels year-on-year.

Arcelor Mittal Activity Report 2006 37Ensuring health and safety of thehighest standard is a core componentof Arcelor Mittal’s business strategy.Every aspect of the product we createdepends on our employees ability to workin a safe environment. As such thiswas one of the first topics the GroupManagement Board turned its attentionto after its appointment. In a moveto clearly demonstrate the emphasisand commitment to this critical area,a decision was taken to hold a worldwidehealth and safety day mobilising eachof the company’s 320,000 employeesin March 2007. This day was also usedto launch the company’s new, improvedHealth and Safety policy aimedat reducing the rate and frequencyof accidents on a continuing basis.The Health and Safety department advisesand assists the Group ManagementBoard and the various business unitsin achieving a safe and healthy workplace.From the initial integration phase of themerger, a common Health and Safetymodel was implemented across the entireorganisation which permits the departmentto define and follow-up performancetargets and monitor results from everybusiness unit.An Integration Task Force for healthand safety, comprising managers fromboth predecessor companies, defineda common road map, strategy andorganisation for Health and Safety –drawing on the best systems and reportingstandards of the two companies.These were presented and discussedat a special Health and Safety conventionheld in Paris in January 2007 andattended by around 100 Health and Safetymanagers from the business units.A new methodology was developedfor defining safety targets. A particularfocus is given to Health and Safetyleadership and behaviour; implementationof a Health and Safety management systemwith systematic audits; a safety assessmentof all the risks inherent in the business;and sharing of best practice andinformation systems.An injury tracking and reportingdatabase is being put in place to trackall information on injuries, lost mandays and other significant events.It incorporates a return-of-experiencesystem for disseminating lessons learnedfrom individual incidents so that otherbusiness units can learn from them.The aim is to achieve faster andmore accurate feedback on the causeof accidents in order to improveprevention and prevent recurrence.The Group’s determination to achievea material reduction in accident ratesis demonstrated in the new Group Healthand Safety policy, which is publicly postedin offices and plants across the company.The policy outlines the commitment ArcelorMittal has made to the Health and Safetyof all employees, both on and off the job,in order to become the safest steelcompany in the world. To that end,a set of principles has been defined anda policy laid down with the clear objectiveof working vigorously towards a goal of zeroaccidents and injuries. The company willcontinue to work not only to meet, but tosurpass, local regulatory requirements.The Health and Safety department willfocus on new leading indicators to developa preventative strategy on accidentsand illnesses. The success of this policyrequires the involvement and commitmentof everyone working for and withArcelor Mittal.Performance in 2006Both Arcelor and Mittal Steel achieveda further reduction in the frequency rateof accidents in 2006, but there wasno comparable fall in the rate of highimpact occurrences. To tackle thispersistent problem, business unit plansfor 2007 focus on reducing accidentsin three priority areas: those occasionedthrough falls, crushes or in the courseof new construction work.In addition, a set of new standardswas adopted to tighten the conditionsrelating to a number of problem areas– such as working at heights or withina confined space. All contractors engagedon major projects will be subject toaccident-prevention measures that includerisk assessments and regular safetyreviews. Compliance with standards willbe monitored on a constant basis.Lenina coal mineIt is distressing to report that,on 20 September 2006, a methaneexplosion occurred in the Lenina mineat the Group’s Kazakhstan CoalDivision. Some 41 miners lost their livesin this tragic event.Immediate action taken includedboth financial and moral support forthe families of the victims. In addition,risk assessments at each mine werereviewed and all controls were checkedbefore recommencing operations.The company launched a fullinvestigation to establish the root causesof the explosion. There was also aGovernment inquiry.Both investigations establishedbehaviour as the major issue. Followingthe conclusion of the investigations,the company took a number of actions.First, it decided to invest heavily inthese mining operations to improve bothsafety and productivity simultaneously.Safety-related capital investment includesthe upgrading of methane degassing andmine ventilation systems, the installationof electrical and telemetry (gas detection)systems. The programme will cost aroundUS$100 million over four years.In addition to the investmentprogramme, renewed emphasis hasbeen placed on improved safety leadership(not only in Kazakhstan but throughoutthe Group). Senior managementfrom Kazakhstan has made a seriesof visits to world-class undergroundcoal mining operations in the USA.The team has been able to viewfirst-hand the safety programmes,training, major hazard control techniquesand equipment used in these mines.There has also been a major reviewof the safety culture in the mines.This has resulted in an upgradingof training for various roles as well asa specific programme on safety leadershipfor all managers.Finally, there has been a renewedeffort on communication and awareness,supported by the Health and SafetyDay initiative, through upgrading safetycommittees and community programmes –including those involving unionsand schools.Health and Safety DayIn order to raise awareness of healthand safety issues, the Group helda company-wide Health and Safety Dayon 6 March 2007 involving all 320,000employees and 140,000 contractors.The timing was chosen to coincidewith the launch of the new Group Healthand Safety Policy. Organised with thehelp of the employees’ representatives,the Health and Safety Day is set tobecome an annual event.The purpose of the event was tomobilise the Group’s entire workforce –including subcontractors – to improverisk awareness, identify best practiceand promote knowledge sharing inthe Health and Safety area.At all sites, a corporate campaignvideo was played, together with a seriesof short films. They included a personalmessage from President and CEOLakshmi Mittal, subtitled into 13 languages,stressing the critical role Health andSafety plays within the Group. He andother members of the Group ManagementBoard, together with members of theManagement Committee, spent the dayvisiting as many Arcelor Mittal plantsas possible to communicate the messagein person and to take part in discussionsaimed at further improving Health andSafety performance.A variety of other activities took place,varying from site to site. There wereinteractive stands on topics suchas hearing protection, the loadingof trucks, working at heights, ergonomicsand relaxation. Many sites featuredfirst aid training, games and contestsfor local children, or talks on nutritionor fire prevention. In some case,plants invited local politicians and themedia to take part.

38 Arcelor Mittal Activity Report 2006Performance EnhancementWith its unmatched scale and diversity, Arcelor Mittal benefitsfrom a rich storehouse of technical know-how. Through thePerformance Enhancement Team, that know-how is deployedin a systematic manner to get the best out of every plant,every process and every function.Performance Enhancement and aculture of continuous improvement areat the heart of Arcelor Mittal’s success.The Corporate Performance Enhancementteam coordinates and drives the process.The activities of the PerformanceEnhancement team are structuredalong three lines:• Strategy and performance improvement.This team works to ensure clarityof alignment between corporate andbusiness unit strategy; supports theinvestment allocation process; ensuresfocus and effectiveness of performanceimprovement efforts; and leads orsupports high priority projects.• Asset and operational excellence.This team aims to ensure standards ofoperational and technical excellence aredeveloped and implemented for all coreoperating processes across the group.It also coordinates the deploymentof operational experts across the groupand leads the implementation of a globalasset risk management system.• Performance and knowledgemanagement. This team is workingto develop and integrate the Group’sglobal technical benchmarking system.It also coordinates the development anddocumentation of the Arcelor Mittal wayfor performance improvement, and leadsthe Knowledge Management Programme.Leveraging knowledgeand skills globallyIn the wake of the merger, the PerformanceEnhancement team established a numberof taskforces to drive integration ofknowledge management and performanceimprovement processes. Coordinatedby the corporate Performance Enhancementteam, these taskforces were composedof operating managers from all sectorsand geographies, and have been workingto align key performance indicatorsand design an integrated knowledgemanagement programme.The Group is developing a globalperformance benchmarking databaseand, where possible, standardising and“industrialising” processes and toolsfor driving improvement deployed aroundthe company. A skills database is beingcreated to identify and log individualsources of expertise in every area.Together with the establishment ofspecialist teams, the database will allowskills to be transferred around the Groupquickly and effectively. A cadre of expertswill be available to support any unitaround the clock.In addition to supporting operationalimprovement, the Group is seekingto leverage its scale and size to improveits capital investment processes.One example will be the establishmentof a blast furnace reline team whichwill develop a standardised set of designs,oversee reline planning and managecontractual relationships with suppliers.These processes will be supported byan expanded Knowledge ManagementProgramme (KMP), designed to lift the baron future performance. The annual KMPmeetings, which bring together all thekey people involved in a given functionor technical area, will be extended.With a richer knowledge base on whichto draw following the merger, their focuswill be on operational excellence.Across the Group, global or regionalinitiatives include programmesfor improving yields and optimisingscrap and energy usage. A group-wideprogramme to implement “total costof ownership” approaches to procurementand use of key materials is underway,building on approaches establishedby the two former companies.The ‘Twinning’ ProcessThe sharing of information at the corporate,regional and operating level lies at theheart of the Performance EnhancementProgramme. To accelerate the process,a number of plants sharing commoncharacteristics (such as productionroute or product mix) have been ‘twinned’to create ongoing interaction betweenthem in a programmed manner.In this process, operational andtechnical teams make regular visitsto their counterparts in the twinnedplant, exchanging ideas and transferringbest practice. Arcelor Mittal is convincedthat these and other initiatives todraw on the expanded know-how ofthe enlarged Group and take advantageof the Group’s scale and scope will drivesuperior performance in the years ahead.This concept is actively expanded.

In the wake of the merger,the Performance Enhancementteam established a numberof taskforces to drive integrationof knowledge management andperformance improvement processes.Arcelor Mittal Activity Report 2006 39

40 Arcelor Mittal Activity Report 2006Operational ReviewFlat Carbon AmericasArcelor Mittal’s Flat Carbon Americas division comprises substantialoperations in Brazil, Mexico, the US and Canada. Combined, they representthe largest and most diverse flat-rolled supplier in the hemisphere,spanning a mix of mature and developing markets. These operationsshare markets and technologies and thus offer significant opportunitiesfor synergies and performance improvements.

Arcelor Mittal Activity Report 2006 41Overview of operationsIn Canada and the US, where growth ratesare modest, major opportunities existfor differentiation with sophisticated usersof value-added products. End-user demandin these markets has been both robustand stable since the 2004 recovery.Arcelor Mittal is the leading North Americansupplier to these sophisticated customers.Arcelor Mittal is the number one steelproducer in both Brazil and Mexico,the two largest steel markets in LatinAmerica, and is remarkably well positionedto capture the growth opportunitiesin both markets. In Brazil, a morefavourable political environment and astronger commitment to infrastructureinvestments is pushing annual steelconsumption growth towards the 5% level.CST and Vega do Sul are already leadingsuppliers to sophisticated South Americanend-users, such as the automotive sector,and have ample opportunity to expandcapacity to meet growing regional demand.In Mexico, the acquisition of Sicartsa willprovide significant synergies in steelmakingoperations. Through its partnership withAceros Planos Mexico, Lázaro Cárdenasis already a major sheet supplier in Mexicoand continues to explore opportunitiesfor expanding its downstream presence.Through its CST and Lázaro Cárdenasoperations, Flat Carbon Americas isthe largest global supplier of slabs.With the ability to produce large volumesof special quality grades – API, IF steel,tin-mill substrate – these operations aremuch less susceptible to the volatilitythat affects commodity grades.Performance in 2006The year 2006 was a solid onefor Flat Carbon Americas, with shipmentsof around 30 million tonnes,revenues of US$21.9 billion, EBITDAof US$3.6 billion, and operating incomeof US$2.6 billion. Comparable figuresfor 2005 were 28 million tonnes,US$20.9 billion, US$3.6 billionand US$2.7 billion, respectively 1 .The Brazilian and Mexican operationsenjoyed strong and stable marketsin 2006, with those in Brazil achievingrecord output. In North America,markets tightened in the first threequarters of the year and then weakeneddue to high imports and resulting excessinventories, particularly in the distributionsector. This had a dampening effecton the seasonally weak fourth quarter.InvestmentsA major expansion at CST, which willbe commissioned in the second quarterof 2007, will boost its slab-makingcapacity from 5 million tonnes to 7.5million tonnes. The project, which is setto cost a total of US$1.2 billion, will provideCST with a large, environmentally-friendlycoke complex, a new blast furnace,new steelmaking and continuous castingcapacity, and ancillary improvementsin infrastructure. It will begin toproduce substantial additional volumesin the second quarter of 2007.The Mexican slab operations arefocused on three main goals: maintainingand extending their global leadershipin more sophisticated slabs; movingdownstream to capture domestic marketopportunities; and investing in rawmaterials. Current investments at LázaroCárdenas are targeting quality upgradesand the acquisition and expansion ofiron ore mining. The first of these miningprojects will begin production in 2007.In addition, Mexican operations willexpand by over 2 million tonnes withthe conclusion of the Sicartsa acquisitionin the second quarter of 2007.Through this acquisition, Arcelor Mittalwill become the largest steel producerin Mexico, adding to its current slabportfolio an extensive network of low-costbar capacity. In addition to the synergiesrelated to integrating primary operationswith the adjacent Lázaro Cárdenasoperations and to integrating long-productoperations into the regional long-productsgroup, it is expected to greatly increaseoutput at the Sicartsa facilities, reducingan already low-cost base.Current priorities in the US are toimprove plant performance. While morethan US$200 million of targetedsynergies announced with the acquisitionof ISG in 2005 have been realised, majoropportunities to optimise plant operationsand streamline production remain.Most of the US$450 million, now beinginvested annually, supports these objectivesby upgrading primary (iron and steelmaking)assets. In addition, significant additionalsynergy opportunities are being realisedthrough operational benchmarking withEuropean and Brazilian operations.At the same time, the US operationsare investing heavily to meet customers’evolving product needs. A prime exampleis the 650,000 tonne galvanizing linein Cleveland that was commissioned lastyear. All of these projects are being pursuedthrough Flat Carbon Americas’ closepartnership with the United Steelworkers,which benefits not only the companybut also its employees.Dofasco, the Canadian market leaderin terms of quality and value added,represents the fourth major componentin the Flat Carbon Americas portfolio.As a result of Arcelor Mittal’s consentdecree with the US Departmentof Justice, Dofasco operated undera hold-separate arrangement fromAugust 2006 until February 2007.During 2006 – benefiting frombenchmarking and synergy identificationwith the former Arcelor – Dofasco realisedmanagement gains of C$75 million,well beyond its planned targets. Integrationwith the USA now offers the opportunityto capture substantial additional synergies,particularly in terms of commercial activitiesand plant optimisation. Such synergieswill enable the Canadian operationsto strengthen their position in valueadded markets while also dealing withthe cost pressures generated by thestrong Canadian dollar.Product developmentFlat Carbon Americas’ R&D complexin East Chicago, Indiana, is pursuing themost aggressive product developmentprogramme in the company’s history.In 2006, it successfully introduced multiplenew products, particularly AdvancedHigh Strength Steel that allows automakersto produce safer, more fuel-efficientvehicles with a highly cost-competitivesteel product. The 2007 productdevelopment goals are just as aggressive.With the integration of Dofasco,this R&D group will number over 200 staff.The futureIn North America, the inventoryadjustment experienced late last yearis expected to be complete by thesecond quarter of 2007, when still-strongend-user demand – particularly inindustries such as energy, capital goodsand non-residential construction –will drive a full recovery. The criticalautomotive sector is expected to consumesteel at rates comparable to 2006.In Latin America, the strong local demandfor CST’s products experienced in2006 is expected to continue in 2007.Finally, the market for slabs is expectedto maintain its momentum.The businesses of Flat Carbon Americasare well positioned to realise theirtarget of achieving value enhancementsand synergies. Just as importantly,they are committed to remainingleading corporate citizens in termsof environmental, community andsocial impact.1 Figures for both years are pro forma,reflecting the acquisitions of ISG in 2005 andDofasco in 2006 as well as the2006 integration of South Americanoperations into Arcelor Brasil.

42 Arcelor Mittal Activity Report 2006Operational ReviewAsia, Africa, Commonwealth of Independent States (AACIS)As the number one steel producer in Africa, and with plantsin Macedonia, Bosnia, Ukraine and Kazakhstan, Arcelor Mittalenjoys the twin benefits of a large, low-cost production basewith a strong footprint in some of the world’s fastest growing steelmarkets. The main destinations for AACIS shipments are Africa(43%) and CIS and Middle East (15% each).

Arcelor Mittal Activity Report 2006 43Performance in 2006Total shipments for AACIS (including thePipes and Tubes business) rose 9% to20.3 million tonnes. Demand for longproducts was supported by a constructionboom in Ukraine, CIS, the Gulf Statesand North Africa. In the Middle East,demand was stable.Flat product shipments increasedby 2% in 2006. For Mittal Steel Temirtau,an anticipated sharp fall in sales to Chinawas offset by growth in demand fromCIS, the Middle East and Europe.In South Africa, the level of shipmentswas held down by capacity constraintsand a number of production-related events.Production fell 2.8% on the year.AACIS sales rose 19% on the year toUS$14.7 billion. EBITDA of US$3.1 billionwas similar to 2005. The 2006 figuresinclude a full year of Kryviy Rih in Ukraine(acquired by Mittal Steel in October 2005)and Sonasid in Morocco (acquiredby Arcelor in June 2006). The integrationof the Ukrainian business yieldedUS$240 million of synergies.InvestmentsOngoing investment projects include thereconstruction of coke oven batteries anda blast furnace reline in Ukraine;the installation of a new cold rolling milland colour coating line in Temirtau; anda new galvanizing line in South Africa.Among the major new projects to launchthis year will be the US$1 billion-plusexpansion of Kryviy Rih, to take productioncapacity to 10 million tonnes; two newkilns and a bar and rod mill in SouthAfrica; and the integrated route projectat Zenica, Bosnia.OutlookConditions are expected to remainfavourable in most markets in 2007,though some pressure on volume andprices is expected in CIS and EasternEurope. In South Africa, demandfor long products is set to rise on theback of the Government’s US$60 billioninfrastructure development programme.Pipes and TubesArcelor Mittal produces a mix of smalland large diameter welded pipes andseamless tubes at 11 plants around theworld. Strong demand from the energyand infrastructure markets in 2006 helpedto lift shipments to 1.3 million tonnes.Together with a firm trend in product prices,revenues rose to US$1.2 billion.InvestmentsInvestment projects costing US$130million are either underway or plannedat all the main pipes and tubes facilities.They are designed to expand capacity toaround 2 million tonnes a year by 2010,improve quality, lift the proportion ofhigh-end products – particularly thoseaimed at the oil and gas industry –and reduce costs. New capacity atthe Aktau plant in Kazakhstan wascommissioned in February 2007.OutlookThe markets for seamless and largediameter welded pipes are expectedto remain steady although pricing willcontinue to be impacted by Chinesecompetition. Demand for small diameterwelded pipes is expected to be in linewith that in 2006.Stainless SteelArcelor Mittal is a world leader in stainlesssteel and nickel alloys. In 2006, therewas a marked recovery in demand forstainless steel with worldwide consumptionrising by 9.6% – despite a surging nickelprice. Demand was especially firm inEurope, the US and Brazil, and pricesrose over the first three quarters of theyear. Supply was tight, despite a 40%lift in Chinese output which increasedself-sufficiency in China from 60% to 70%.Re-stocking slowed towards the endof the year, but base prices for stainlessstill pushed up to new all-time highs.The European price of extra alloys rose40% on the previous year to an averageof US$1,639/tonne.Total shipments rose from 2.1 milliontonnes to 2.3 million tonnes. Allowingfor the disposal of Ugitech and theacquisition of an increase shareholdingin Acesita, this represents an underlyinggrowth of 13%. On the same basis,revenues reached US$7.3 billion generatingan EBITDA of US$0.9 billion.OutlookStrong demand at the start of 2007is likely to be tempered by increasingsupply growth in the US, Western Europeand Asia as the year progresses.MiningArcelor Mittal operates its own ironore and coal mines in eight countries.Together with a long-term strategic supplycontract in South Africa & USA and amajor iron ore project under developmentin Liberia, this provides it with a valuablehedge against raw material price increases.Iron ore availability (including strategiccontracts) rose to 64.4 milliontonnes. This enabled the new Group(including Dofasco) to attain 45%self-sufficiency in iron ore. Coal productionwas 4.4 million tonnes. With plans toexpand production in Mexico, Bosnia,Ukraine and Kazakhstan – and commenceproduction in Liberia – the Group’s relianceon external iron ore supplies is setto fall from 55% of annual requirementsto 45% by 2010.On 23 February 2007, Arcelor Mittalsigned various agreements with the stateof Senegal in West Africa, to developiron ore mining in the Faleme regionof South East Senegal. The project willencompass the development of the mine,the building of a new port near Dakarand the development of about 750 kmof rail infrastructure.

44 Arcelor Mittal Activity Report 2006Operational ReviewLong Products, AM3S, Wire DrawingGrowth in demand from the construction sector in Europeand South America was a major driver behind the strongperformance of Long Products in 2006. With price increasesimplemented in a number of markets to recover rising costs,the outlook for 2007 is positive.Long ProductsLong Products operates from 36 countriesin Europe and the Americas and enjoysa particularly strong footprint in the growingmarkets of Eastern Europe and SouthAmerica. A stable business with a historyof sustained profitability, it offers thebroadest product mix in the marketplace.Production consists of blooms andbillets, bars and rebars, wire rod and wireproducts, sections, sheet piles and rails.Performance in 2006Long Products (including Wire Drawing)lifted shipments from 23.2 million tonnesto 25 million tonnes on a pro formabasis. In Europe, demand was boostedby growth in the construction industryallied to significant investments in railwayinfrastructure. European shipmentsof sheet piles and rails rose 23%.Demand for beams, wire rod and barswas also strong.In the Americas, South Americanvolumes reached a new record, up 11%compared with 2005. In Argentina,domestic demand was boosted by goodgrowth in construction activity.Total sale rose from US$16.6 billionto US$18.5 billion and EBITDA increasedfrom US$2.6 billion to US$3.6billion. In Europe, profits rose sharplyon the back of expanded volumes andhigher prices, partly offset by increasesin scrap and other input prices. In someproduct areas, prices weakened in thefinal quarter. In the Americas, increasedshipments in South America offseta fall in prices. In North America,higher costs reduced margins.InvestmentsA number of major projects wereinitiated in 2006 and are ongoing.These include investment in Argentinato lift capacity at Acindar from 1.2 milliontonnes to 1.6 million tonnes and threesubstantial projects in Poland involvinga wire rod mill modernisation, a newrolling mill and a blast furnace reline.OutlookIn Europe, there is continuing strongdemand in many sectors of the market.In rails and special profiles, prices havefirmed and the outlook is excellent.There are good levels of activity in sheetpiles and sections and a firming in pricesfor rebars. There are signs that wire rodprices have bottomed out following fallsfrom last October onwards.In South America, domestic marketdemand remains generally strong.Elsewhere in the Americas, the marketis generally recovering at low levelsand price increases have beenimplemented in Canada to reflecthigher scrap costs.Arcelor Mittal Steel Servicesand Solutions (AM3S)The operations of AM3S span a worldwidenetwork of distribution centres, steelservice centres, construction andfoundation solutions for infrastructureprojects. Operating more than 500facilities in 32 countries, AM3S servesapproximately 200,000 customers.It offers a full portfolio of flat and longproducts, tubes and stainless steel,adding value through further processingand the provision of technical, engineeringand consultancy support. AM3S alsomanages the sales network for theGroup’s worldwide exports. AM3S is themost important customer for both ArcelorMittal Flat and Long Carbon BusinessSegments, benefiting from customerloyalty to strengthen synergies and optimisecosts. AM3S’s ambition is to optimiseits efficiency through this close partnership.AM3S offers innovative solutionsand focuses on customer loyalty byproviding high-quality and personalisedservices to meet the expectationsof its clients, such as automotivemanufacturers that are increasinglyoutsourcing their operations. It gives bettermarket intelligence to end customers.That, in turn, allows them to better manageinventories in the supply chain to reducevolatility and improve working capitalmanagement. Thanks to the size and scopeof the company and its extensive globalnetwork, AM3S delivers enhanced productrange and unique solutions enabling abetter knowledge of its customers.Expansion movesIn 2006, AM3S extended its reachthrough acquisitions and the integrationof assets from other parts of the Group.In France, Arcelor Mittal Distributionacquired or lifted the majority of Devillersand Alliance Metal Group. Theseacquisitions will form the core of a newoperation, Total Offer Provider (TOP),to serve customers in the machine tool,yellow goods and other manufacturingindustries. TOP will be extended to Centraland Eastern Europe and China.Arcelor Mittal Steel Service Centresintegrated five service centres inGermany and Italy previously operatedby the Flat Carbon business. It acquireda sixth, in Casablanca, Morocco.It expanded its downstream activities withthe acquisition of Mobilever in Italy andthe signing of a new partnership with Mitsuiin South Africa.Arcelor Mittal Construction acquireda Swedish company, Rydab, which providessteel solutions for houses and liftedits holding in Perfilor, its Brazilian profilingcompany, to 51%.


46 Arcelor Mittal Activity Report 2006Operational ReviewLong Products, AM3S, Wire DrawingcontinuedInvestmentsCapital expenditure in 2006 was US$136million. Arcelor Mittal Constructionexpanded its network with new facilitiesin Poland, Slovakia and Spain. Constructionof a new service centre was startedin Slovakia. The Foundation Solutionsbusiness established a new pipe millin the US (through Skyline) and a newsheet pile cold rolling mill in Malaysia(through Oriental Sheet Piling). As a result,Arcelor Mittal is now producing sheetpiles in Asia and is actively developing steelfoundations solutions in the region.Performance in 2006With the exception of Southern Europe,which suffered increased penetrationby Asian imports in the second halfof the year, market conditions werefavourable in most of AM3S’s marketsin 2006. On shipments of 14.3 milliontonnes, compared with 13.7 milliontonnes in 2005, revenues rosefrom US$10.8 billion to US$11.9billion. AM3S achieved an EBITDA ofUS$0.6 billion (2005: US$0.4 billion).OutlookMerger synergies of US$150 millionare targeted. These will come fromvolume growth in Central and EasternEurope, achieved through partnershipwith the Group’s steel mills in the region.A further integration benefit at ArcelorMittal International is the expectedsale of around 12 million tonnes of steelin the current year - this is a resultof a worldwide efficient sales networkwhich is close to the end user customers,and source optimisation throughan extended internal supplier base.AM3S’s strategy will focus on extendingthe range of services to anticipatecustomer developments, targeting morevalue-added products and seeding itsbusiness model outside of its core regions.Above all, it will continue to work to buildcustomer loyalty through reliability andspeed of supply, a willingness to innovateand the delivery of global steel solutionsWire DrawingArcelor Mittal Wire Drawing is the mostimportant and diversified steel wire drawerin the world with a production capacityclose to 3 million tonnes in the Americas,Europe, Asia and Africa. Its strategyis to pursue the consolidation that hasstarted in Europe and to grow in Asia,focusing on projects that reinforce itsposition as a global solution provider withsuperior R&D and innovation capability.Performance in 2006Price pressures led many of the WireDrawing operations to prioritise marginsover volume in 2006 in Europe and NAFTA.China is now the largest manufacturingplace for car and trucks tyres and thereforealso for steelcord wires and strands.The sector of energy is booming.Arcelor Mittal Wire Drawing benefitsfrom increasing demand in wire forthe construction of flexible pipes and wireropes for platforms mooring lines.The development of renewable energiessuch as solar power has lead ArcelorMittal Wire Drawing to develop new wires,contributing to the increased efficiencyof the photovoltaic industry.2006 was a good year for constructionapplications. Arcelor Mittal Wire Drawingis a major supplier to this industry in fibresand prestressed wire and strands.OutlookWhile global demand for wiressolutions in construction, automotiveor energy industries remains good,growing over-capacity in some regionsputs pressure worldwide on margins.2007 capacity investments in Hungaryand China for steelcord are followingthe shift in tyre manufacturers’ demandfrom NAFTA and Western Europe to Asiaand Central-Eastern Europe.Price increases are implementedfrom end of the first quarter of 2007to reflect higher raw material costs.

The sector of energy is booming.Arcelor Mittal Wire Drawingbenefits from increasing demandin wire for the construction of flexiblepipes and wire ropes for platformsmooring lines. The developmentof renewable energies such as solarpower has lead Arcelor Mittal WireDrawing to develop new wires.Arcelor Mittal Activity Report 2006 47

48 Arcelor Mittal Activity Report 2006Operational ReviewFlat Europe, Automotive, Plates, R&DThe Arcelor Mittal merger has created by far the largest Flat steel producerin Europe with operations that range from Spain in the West to Romaniain the East and cover the complete Flat Carbon Steel product portfolio.Also under the responsibility of the GMB member in charge of Flat Europeare two ‘transversal’ business lines – Automotive and Global Plates – both ofwhich are structured to meet the needs of global markets.Flat EuropeMarket conditions in 2006The year witnessed a good recoveryafter the difficult conditions experiencedin the second half of 2005, althoughincreased import pressure (from Chinain particular) affected markets in SouthernEurope. Prices generally firmed as theyear progressed. On the input side,a doubling in the price of zinc dramaticallyimpacted the cost of coated products.While Arcelor Mittal applied a zincsurcharge for spot deliveries, the profitabilityof some long-term contracts was adverselyaffected. Following renegotiation, yearlycontracts now take the impact of thezinc price into account.In automotive, the European lightvehicle market enjoyed continued growth(+1.5% on the year) which came mostlyfrom Eastern Europe. The householdappliances market saw increased activityacross Europe with the strongest growthcoming from Eastern Europe (+12%compared with +4% in Western Europe).The construction market grew between5% and 7% across Europe and theheavy plates market also experiencedstrong growth driven by wind powerapplications in Western Europe andby construction in Eastern Europe andTurkey. Steel for packaging applicationsremained a difficult market.Performance in 2006The year 2006 was a solid yearfor Flat Europe, with recovering volumesand good results. Total shipmentsincreased from 30.7 million tonnesto 33.1 million tonnes with a strong finalquarter to the year. These figureswere achieved despite a voluntary cutin volumes in the second and thirdquarters, as Arcelor Mittal sought to adjustsupply to falling apparent consumption,and a 5% fall in packaging volumes.Operational performance was excellentboth in Western and Eastern Europewith a number of facilities achievingrecord production levels and overallmanagement gains fully in line with theArcelor Mittal value plan.Pro forma revenues totalled US$27.6billion, up from US$24.9 billionin 2005. However, as a consequenceof increased raw material prices,EBITDA came in at US$3.9 billioncompared with US$4.2 billion in 2005.Again, the fourth quarter was the bestof the year, reflecting price rises torecover higher zinc prices and managementgains arising out of integration.InvestmentsFlat Europe’s capital spending wasUS$1.28 billion, up from US$1.02billion in 2005.Major projects in Eastern Europe includeda blast furnace revamping, a newcontinuous caster, a colour coating line,and a hot strip mill in Poland (to becommissioned in 2007). The casterproduced its first slab at the end ofDecember. At Galati in Romania, blastfurnace 5 was restarted after capital repairin May and pickling line 2 commencedproduction after a difficult period ofcommissioning. At Ostrava, investmentto lift slab production to 1.5 million tonnescontinued. In 2007, investments in EasternEurope will continue in order to fullycapture the growth potential in this region.Projects include modernising the cold rollingmill in Krakow and increasing electricalsteel production in the Czech Republic.In Western Europe, two blast furnaceswere relined (Avilés in Spain andDunkerque in France) and the revampof the continuous caster at Dunkerqueis set to add additional capacity. In orderto adapt production flows, packagingactivity of Mardyck, France, was transferredto other packaging locations in Europe,thus optimising supply chain for cold rollingand annealing activities between Mardyckand Montataire. Projects for 2007 includea blast furnace relining in Fos, a repairof the second blast furnace in Avilés,a steel plant upgrade in Dunkerque,a new galvanising line in La Magona (Italy)and investments aiming to increase theproductivity of the different sites.OutlookIn Western Europe, the trend in sellingprices remains positive. The pressurefrom Chinese imports is expected tobe less marked in 2007. Demand fromthe automotive industry remains robustand annual contract renegotiationshave been positive. Construction demandis also buoyant. In Eastern Europe,shipments are on a rising trend but priceshave been generally lower. Demand forplates remains particularly firm.Major integration gains are being achieved.Arcelor Mittal Flat Europe now operatesone price list and one face to the customer.Optimisation of the supply chain – with,for instance, Polish slabs feeding theWestern European plants – is deliveringmajor benefits. In 2007, the East/Westmaterial flow will be further optimised.Flat Europe is on target to achieve its shareof the anticipated merger synergies.Automotive worldwideWith 17 million tonnes of steel sheetshipped in 2006 (the figure includesDofasco), and a worldwide market shareof 25%, Arcelor Mittal is the world leaderin steel sheets and steel solutions forthe automotive industry.


50 Arcelor Mittal Activity Report 2006Operational ReviewFlat Europe, Automotive, Plates, R&DcontinuedArcelor Mittal now operates a uniqueworldwide product policy to serve theplatforms of the leading automotivemanufacturers. With a common catalogueand a global manager appointed for eachkey account, the organisation is positionedto deliver even higher levels of serviceto its global automotive customers.In 2006, global partnerships were fosteredwith a number of major Original EquipmentManufacturers (OEMs) and these effortswill be extended in 2007.Arcelor Mittal is also the producer withthe broadest and most technologicallyadvanced product portfolio, renowned forits innovation and quality. It plays a keyrole in every stage of vehicle manufacture– from initial design to series production.It continues to invest in tomorrow’sproducts with an R&D spend that topsUS$65 million a year, developing a productoffering that is constantly being enhanced.Global Automotive expects to improve itsprofitability in 2007, while seekingto consolidate market share and establisha stronger presence in Asia.Global PlatesGlobal Plates covers 13 plate mills locatedin Europe, the US and South Africa.While its share of the worldwide platesmarket is only about 5%, Arcelor Mittal isnevertheless the undisputed leader in thespecialty segment (cryogeny, alloyed plates,special stainless plates, heat treatedplates). Global Plates coordinates sales ofall Arcelor Mittal specialty plates worldwide.In 2006, 4.4 million tonnes of plateswere produced. Overall demandfor plate products was extremely robustin all major segments and availablecapacity was fully utilised.Major investments in 2006 weretargeted on increasing the capacityof high-quality plates. In Gijón, Spain,a new automatic gauge control wasinstalled. Industeel inaugurated three newheat treatment furnaces to expand supplyof quenched and tempered plates.Global Plates’ strategy is to reinforceits worldwide leadership in specialtyplates by integrating the US platesactivities with those of Industeel in Europe.Significant synergies can be achievedthrough leveraging common R&D activities,benchmarking operations and sellingall special products through a commonworldwide network.R&DArcelor Mittal now operates 13 majorresearch centres in Europe, the USand Canada. Between them, they employmore than 1,200 researchers. They wereresponsible for a record number of newproduct launches in 2006. The Group’snew size has helped to increase thenumber of research partnerships throughoutthe world. Collaboration with scientific andtechnical universities has been extendedand has led to strengthened relationships.In the wake of the merger, the focushas been on transferring know-howbetween the US and Europe. As a resultof the first such transfer, Usibor,a corrosion-resistant steel developed byArcelor, is now being produced at theformer Mittal Steel plant at Riverdale,in the US. Production of martensitic gradesdeveloped by Mittal Steel in Chicagoand deployed by the auto industry in keysafety-critical applications such as roll bars,will commence in Europe later in 2007.Integration will continue in order to unifythe many different strands of researchnow underway in one global organisation.All of Arcelor Mittal’s R&D efforts willbe maintained throughout 2007,taking advantage of the global size of thecompany to make the technological leadeven greater for the benefit of customers.Transferring and deploying innovationsquickly to the different locations and forthe benefit of all customer segments willbe emphasised so as to increaseprofitability of investments.

Arcelor Mittal Activity Report 2006 51Arcelor Mittal now operates a uniqueworldwide product policy to servethe platforms of the leading automotivemanufacturers. With a commoncatalogue and a global manager appointedfor each key account, the organisationis positioned to deliver even higherlevels of service to its global automotivecustomers. In 2006, global partnershipswere fostered with a number ofmajor Original Equipment Manufacturers(OEMs) and these efforts will beextended in 2007.

52 Arcelor Mittal Activity Report 2006Operational ReviewPortfolio – Corporate FunctionsThe Corporate Functions of the Group have responsibilityfor a wide range of activities, including Human Resources,Health and Safety, Commercial Coordination, MarketingSupport, Performance Enhancement, SustainableDevelopment, International Affairs and the Group’s operationsin China. Many of these functions are discussedin detail in other sections of this Report.

Arcelor Mittal Activity Report 2006 53Performance EnhancementThe Group’s much expanded scaleand scope, together with the enrichedskills base the merger has created,have opened up new opportunities tomobilise internal know-how to achieveoperational excellence in every sphereof the Group’s business. With significantvalue creation potential beyond thatof its individual business segments, ArcelorMittal has a unique strategic advantage.Bringing together many of the Group’sleading experts on technical andmanagement issues, the CorporatePerformance Enhancement team seeksto realise that advantage by leveragingknowledge and skills across the Groupon a global basis. It is now building on theknowledge sharing programmes and globalbenchmarking systems developed by bothArcelor and Mittal Steel to:• Standardise processes and tools.As the best of all methodologiesare documented, standard trainingcourses will be developed throughthe Arcelor Mittal University to providethem Group-wide.• Leverage the Group’s scale andknowledge base. Expertise databasesare being compiled. At the same time,specialised teams of experts arebeing developed along with rapidresponse teams to address criticaloperational problems as they arise.The specialist blast furnace reline team,an example of the new policy, willleverage the Group’s scale to improvecapital efficiency in this major process.• Build and maintain a globalbenchmarking system using commondefinitions, platforms and standards toenhance global knowledge sharing andfacilitate the transfer of best practice.Human RelationsHuman Resources has been closelyinvolved in the transition to a neworganisational and management structure,the appointment of key personnel andthe establishment of a new reward strategy.It has also taken the first step towardsthe creation of a transparent, internaljobs market with a ‘Job Offers forManagers’ website.A unified leadership developmentprogramme is being put in place.It is modelled on the Global ExecutiveDevelopment Process (GEDP) employedby Mittal Steel. The GEDP is a performancemanagement review process that notonly assesses the quality of leadershipwithin all business segments and functionsbut identifies the potential leaders oftomorrow – the so-called ‘high potentials’ –and puts a personal development planin place for each one.Proposals for a new employee relationsframework are also being developed.Arcelor Mittal has a clear goal of buildingstrong employee relations and working withthe trade unions on a partnership basis.Many of the Group’s 320,000 peopleare represented by trade unions; they aretherefore key stakeholders. The Group’spartnership approach has already proveda major success in several countriesand forms the cornerstone of its approachto employee relations.Commercial CoordinationThe Commercial Coordination of ArcelorMittal’s complex marketing and salesactivities is a key function to ensure saleseffectiveness and price leadership.The team’s task is to develop the Group’sapplication of global marketing strategies,to understand global market changes,to organise the immediate adaptationto a changing environment, to seeupcoming risks and arising challengesand to provide commercial direction toArcelor Mittal as industry leader.Commercial Coordination workstransversally and enhances theunderstanding of market developmentsand communication on a Group-level,beyond products and geographies.MarketingA new, high-level marketing organisationhas been established at corporate levelto provide economic and demand analysis,serve as a marketing resource for allsegments in the Group. The organisationcombines macro-economic research withthe collation of steel market data to providemarket, product and segment analysis.The marketing teams also handleArcelor Mittal’s relationships withassociations and steel contact groups,manage commercial communicationsand trade issues. It ensures the Groupis always represented at a high levelin key associations and has a voicein contact groups as a global playerdesigned to avoid trade friction.International Affairs andSustainable DevelopmentThe International Affairs and SustainableDevelopment function supports ArcelorMittal’s businesses in three areas:• Government relations. The teamworks to sustain good relationswith governments at nationaland local level, and manages theGroup’s lobbying activities.• Environmental issues that have animpact on the Group’s businesses.Arcelor Mittal has consistently gonebeyond simple compliance with localenvironmental regulations to ensureit minimises the impact of itsoperations on the world around it.• Corporate Social Responsibilityand Sustainable Development. Frommaintaining the highest standardsof Health and Safety to supportinglocal communities, Arcelor Mittal seesits commitment to act in a sociallyresponsible manner as part of its‘licence to operate’.ChinaArcelor Mittal operates in China throughsales and distribution centres and twomajor joint ventures.In 2006, Hunan Valin, one of China’stop ten steel producers in which theGroup has a 32.90% participation,produced 9.89 million tonnes of crudesteel. Semi-processed silicon steeltechnology was successfully transferred tothe Chinese company and delegates fromHunan Valin went on a six-month trainingprogramme for CSP hot rolling at ArcelorMittal’s Riverdale plant in the US.BNA, the automotive sheet jointventure with Baosteel and Nippon Steel,had a profitable year, achieving productionof 1.8 million tonnes. BNA supplies themain automotive manufacturers in China.Arcelor Mittal completed its final suppliesof plate and heavy beams to the ShanghaiWorld Financial Center. Still underconstruction, the Center will be one of thetallest buildings in the world at 492 metres.A three-year partnership with the UnitedNations Development Programme (UNPD),signed in November 2005, to increaseenergy efficiency and environmentalawareness, was successfully initiated.One of the programmes in the partnershipcontributes to provide capacitybuilding in Clean Development Mechanism(CDM) in 12 provinces in China, as partof the implementation of the MillenniumDevelopment Goals (MDG).In February 2006, Arcelor Mittal agreedto acquire a 38.41% stake in LaiwuIron & Steel. The agreement has still tobe approved by the Chinese Government.

54 Arcelor Mittal Activity Report 2006Integration reviewAs the two leading consolidators in the global steel industry,both Arcelor and Mittal Steel came to the merger with strong track recordsof successful integration. Each was the product of a series of internationalmergers and acquisitions that presented challenging organisationaland cultural issues. As a result of that common history, each had a groupof professionals highly experienced at integrating diverse businessesand delivering anticipated merger gains.

Arcelor Mittal Activity Report 2006 55Drawing on this experience, it wasagreed from the outset that speed wasof the essence in achieving a successfulintegration. An ambitious timetablewas set for putting a new organisationalstructure in place, unifying key functionalareas, and driving the process that wouldcapture the targeted synergies by theend of year three. Quick wins were soughtthat would make an immediate impact.Some 80% of the integration processwas planned to be completed by themiddle of 2007 – when the integrationeffort would largely be incorporatedinto daily business.OrganisationThe new management structure wasput in place over the summer and autumnof 2006 and is designed to create anorganisation that combines scale withagility. At the very top is an 18-memberBoard of Directors responsible for theoverall supervision of the company.The majority of its members areindependent. There are three shareholderrepresentatives and three employeerepresentatives. The Boardis truly international in character.The strategic direction of the businessis the responsibility of a six-strong GroupManagement Board (GMB), membersappointed by the Board of Directors –and which started to work together in earlyAugust 2006. Headed by Lakshmi Mittal,who assumes the role of Chief Executive,its composition reflects the Group’snew structure, which is divided into fivekey segments.All GMB members also sit ona Management Committee of ExecutiveVice Presidents, active since earlySeptember 2006 and responsible forregional or sectoral organisations andGroup-level functions such as purchasing,marketing and Performance Enhancement.Below that committee are just threemore tiers of management. The majorityof appointments down to Managerlevel were announced by early-December.Care was taken to ensure a balanceof appointments from the twopredecessor companies, whilst respectinga “best of both” principle.The new structure is both lean and flat.It is designed to avoid top-heavybureaucracies or functional ‘silos’and deliver a clear line of sight in thedecision-making process. It aims to createan organisation that is at once inventiveand adaptable, with clear accountabilityat every level. Above all, it aims to fosteran entrepreneurial spirit that will keepArcelor Mittal ahead of its competitors.Integration ProcessAn Integration Office was establishedin September 2006 under co-headsdrawn from each predecessor company.Supported by a strong team of managerswithin the business segments, theIntegration Office assembled 20 taskforces– which in turn ran 30 sub-taskforces –to drive integration in each area.With every business segment givena target for the synergies it was expectedto achieve, the taskforces had the jobof confirming those targets ‘bottom up’,work out where the opportunities lay,propose concrete actions and put plansin place to capture them.The integration process is guidedby four simple principles:• Value creation. The purpose isto optimise Arcelor Mittal, not individualbusinesses. A mix of initiatives isbringing both short-term cash gains andfundamental multi-year improvements.• Simplicity. Integration is part of dailylife, with line management accountablefor delivering the expected impact– thereby fostering entrepreneurshipacross the organisation. Synergiesand stand-alone improvement planshave quickly been incorporated in2007 budgets.• Fast, yet sustainable. The integrationdecision-making process runs inparallel with ‘business as usual’.Four core functions – budgeting/control,capital expenditure planning, operationalcontrol and human resources –were integrated as quickly as possibleto ensure immediate and total controlof the ongoing business.• Best of both. A forward-lookingorganisational design has beenimplemented with the best personappointed for each job, irrespectiveof passport, but with attention tobalance between the two companies.The process has been transparentand open, with full data sharing.Similarly, best of both has been appliedin designing key management processes.

56 Arcelor Mittal Activity Report 2006Integration reviewcontinuedThroughout the process, the roleof the Integration Office has beento coordinate challenge and supportthe taskforces (injecting urgency intothe process), provide a quality checkon their work and report back to the GMB.It has also worked closely with InternalCommunications to ensure the progressof the integration and Group aspirationsare communicated fully throughout theorganisation. An Intranet site, openedin November 2006, was quickly followedwith a Web TV launch in January 2007.Both have received excellent feedback.The Integration Office has achievedits goals and was wound down atthe end of March 2007, one quarterahead of the original schedule.At the end of 2006, approximately75% of the targeted US$1.6 billionof synergies are now covered by actionplans. Taskforces and operational unitsare finalising milestones and plans forthe remainder. The organisational structureis in place and HR policies are beingfinalised and implemented. The newArcelor Mittal brand is due to be unveiledin the second quarter of 2007. Mosttaskforces are preparing to merge backinto the business segments from whichtheir members came, though some –such as purchasing – will have a continuingrole for some time to come.SynergiesThe planned merger synergies, worthan annualised US$1.6 billion, are targetedin three main areas: marketing and trading,purchasing, and manufacturing andprocess optimisation. In the final quarterof 2006, merger-related synergies worthan annualised US$269 million weresecured, mainly in the area of marketingand trading. By the end of the first quarterof 2007, the total of annualised synergiesis expected to reach approximately US$500million. It will include some purchasingbenefits, the first gains from manufacturingand process optimisation and also somegains in the area of SG&A.Rapid progress is being made in every area:• Marketing and Trading. Brazilianand Mexican slab sales are nowcoordinated to provide one face to thecustomer. Similarly, in Long Products,on a continental basis, there is aunified commercial organisation offeringharmonised pricing and a better serviceto customers; logistics have beentransformed by switching sourcingto the plant closest to the customerwherever possible. Trading andinternational sales have beenconsolidated into Arcelor MittalInternational, which now operatesa unified sales network with fourregional hubs.In Global Automotive and Flat CarbonEurope, organisational changesto deliver ‘one face to the customer’have improved market dynamicsand the recognition of value providedby the Group. The transfer of keytechnologies between Europe and theUS is allowing both regions to enhancethe range of advanced automotivesteel grades they offer.• Purchasing. Merger synergies areexpected to have a significant impactfrom the second quarter of 2007,as supplier renegotiations and theeffects of global sourcing start to flow.Increased inter-Group sourcing is alreadydelivering benefits. One example:Arcelor Mittal Steel Solutions andServices is sourcing substantial tonnagesfrom the Group’s Eastern Europeanplants that were previously sourcedfrom third parties.• Manufacturing and process optimisation.Material benefits are expectedto start flowing in the second halfof 2007 as several factors combine.The benchmarking of all plants andprocesses, combined with the systematicsharing of best practices, is havinga progressive impact on productivityand efficiency. Plants with similar productor process characteristics have been‘twinned’ to ensure the rapid transferof best practices through the exchangeof experiences.Plans to optimise plant output –by refocusing production to specialiseon a given product area, thus achievingthe longest possible productionruns and avoiding duplicated investmentspending – are expected to havean increasingly beneficial impactfrom 2008 onwards. Specialisationhas already taken effect in the areaof slab manufacturing.The integration process is on scheduleand set to deliver the anticipated synergygains within the forecasted time-frame.

Arcelor Mittal Activity Report 2006 57US$1.6billionannualised worth of planned merger synergies by 2008.

58 Arcelor Mittal Activity Report 2006ConstructionBy combining Arcelor’s range of stainless and carbon steel with Mittal Steel’sstrengths in rebars, the merged Group now offers the fullest possible rangeof products to its construction industry customers. Arcelor Mittal is theworld leader in supplying steel to the construction market, delivering around35 million tonnes of products a year to the building and construction industries.It also offers some of the most advanced building solutions around– including jumbo beams for skyscrapers, heavy plates for bridges, thin sheetsfor facades and roofs and stainless steel for decorative and other uses.


60 Arcelor Mittal Activity Report 2006Technology and InnovationResearch and Development plays a key role in ArcelorMittal’s strategy to lead innovation in the world of steel.The Group employs 1,200 researchers in 13 researchcentres around the world. In 2006, US$185 million wasspent on research. Two-thirds of this amount was focusedon the development of new products and solutions forthe Group’s customers.The Research and Developmenttaskforce set up 14 working groupsto integrate the two companies’ impressiveR&D capabilities – each one co-headed bya Mittal Steel and an Arcelor researcher.They covered the full spectrumof process and product research.Where the R&D budget was allocated:Flat Carbon: 81%Stainless Steel: 7%Long Carbon: 6%Plates: 5%Others: 1%

Arcelor Mittal Activity Report 2006 61The merger has added a new dimensionto the R&D effort by widening the rangeof potential applications for existingtechnical know-how and permittingthe better use of this expanded R&Dresource in order to accelerate projectwork. In 2006, a number of cooperationprojects were initiated between the Arcelorand Mittal Steel R&D teams throughoutthe world. One example: in the automotivefield, hot stamping steel is now beingproduced in the US while martensitic steel- used in key safety-critical applications -is being transferred to Europe.Process R&DIn 2006, process research focused on:• The development of models foroptimising the use of raw materialsand energy;• The modelling of the Group’s processesfrom raw materials to finished productsto improve industrial performance;• Improved recycling of by-products suchas sludge, dust and steel slag. Specialattention is being paid to the recoveryof expensive zinc;• The use of ground tyres as a carbonadditive in electric furnaces. Nowvalidated, the process makes the electricfurnace an even cleaner productionprocess than before;• The start of the second phase of theULCOS (Ultra Low CO 2 Steelmaking)programme. Co-financed by theEuropean Union and the 48 partnersengaged in the programme, ULCOSis aimed at finding new productionprocesses that drastically reduceemissions of CO 2 and other greenhousegases. Five technologies were selectedfor Phase II experimentation.Automotive R&DThe automotive industry constantly seeksto reduce cost, improve passive safety,reduce vehicle weight and increasedurability through even better corrosionresistance. The combined efforts ofArcelor Mittal have achieved a numberof advances in these areas:• The range of high strength and highdeformability steel has been improvedand extended – through, for instance,Dual Phase, TRIP (TransformationInduced Plasticity), and hot stampingsteel. Major research has been carriedout on new metallurgical concepts,carbon steel and stainless steel, makingit possible to consider marketing steel– in the short and medium term –with very high elasticity and plasticity,and capable of the very high energyabsorptions necessary for crash testqualification.• In the field of corrosion resistance, thefirst tests of ultra high surface qualityzinc coating by hot galvanizing for use onvisible parts have aroused considerablecustomer interest.• In the field of mufflers, Ugine & Alzhas worked to develop F18 MNb, anew type of stainless steel providingbetter resistance to oxydation at hightemperatures, necessary as a result ofincreased exhaust gas temperatures.F18 MNb facilitates good catalysis.• In long products, new steel fortruck crankshafts and valve springshave been developed, with highmechanical properties and improvedfatigue resistance, in order toincrease performance and achievea lighter weight.Further R&D is focused on industrialapplications – most notably flat carbonsteel, electrical steel, special platesand stainless steel – and constructionand civil engineering.Integration Quick Wins in R&DThe Research and Development taskforceset up 14 working groups to integrate thetwo companies’ impressive R&D capabilities– each one co-headed by a Mittal Steeland an Arcelor researcher. They coveredthe full spectrum of process and productresearch. About 20 “quick wins” havealready been identified, the following fourof which are particularly significant:• Production of Usibor, an Arcelordevelopment for hot stamping whichoffers top-of-range strength-to-weightcharacteristics and corrosion resistance,is to commence in the US followingtrials early last year. Usibor has anumber of applications in the automotivefield – particularly for bumper and doorbeams, A-pillars and B-pillars.• Production of martensitic gradesdeveloped by Mittal Steel in Chicago,deployed by the auto industry in keysafety-critical applications such as rollbars, will commence in Europe this year.• Outifo software developed in Europeto optimise the design of stampingtools – reducing the need forcustomers to engage in long and costlytest cycles – is being implementedin the US. The software gives acompetitive advantage if they useArcelor Mittal materials.• Process improvements designed by theformer Arcelor process facilities are beingtransferred to former Mittal Steel plants.They include, for instance, processesto reduce clogging in the continuouscaster – thereby improving quality anddelivering performance.

62 Arcelor Mittal Activity Report 2006HR Policy and Skills DevelopmentHuman Resources has played a key role in driving the integrationof the Group in the wake of the merger, establishing the organisationalstructure and overseeing management appointments down to GeneralManager level. That process continued into early months of the new yearwith the announcement of the 2007 bonus plan – detailing the wayin which people will be measured and rewarded – and the completionof a comprehensive job evaluation, benchmarking and salary reviewprocess covering the top management tiers.

Arcelor Mittal Activity Report 2006 63The response to thesechallenges, Arcelor Mittalis investing heavily in thefostering and developing ofinternal talent througha multi-pronged LeadershipDevelopment Programme.The primary focus going forward is talentmanagement. Harnessing and developingthe skills of its 320,000 employees is anintegral part of the Arcelor Mittal visionto be the most admired steel institutionin the world. Enabling employees at alllevels to contribute to the best of theirability is the duty of any good employer.It also makes good business sense.As the leader of the steel industry,Arcelor Mittal has added incentive toidentify and encourage talent from within,and develops programmes to reach itsobjective to attract and retain talent.With its history, the industry finds itselfwith a shortage of leaders at both executiveand general management levels.Demographic trends suggest all industrieswill find it harder to find and keep topmanagement talent in the coming years.Along with many international companies,there is huge competition to develop andattract talented people with multi-countryexperience. Finding managers with bothbusiness and international experienceremains a key challenge. In addition,as a global leader, Arcelor Mittal is taskedwith making careers in the resurgent steelsector attractive. Ensuring there is sufficienttalent for the future leadership needs of thecompany is a primary focusof the existing senior Executives,supported by proactive HR initiatives.In response to these challenges,Arcelor Mittal has been investing heavilyin the fostering and developingof internal talent through a multi-prongedLeadership Development Programme.The Leadership Development Programmecombines several tiers of internal andexternal training with a continuous reviewprocess designed to identify and developa long-term pool of talent.

64 Arcelor Mittal Activity Report 2006HR Policy and Skills DevelopmentNurturing the skills of the workforce is a key priority forthe new Group. The Arcelor Mittal University is one of the waysthat these skills are being captured, along with LeadershipDevelopment, Partnership with Employees and theirRepresentatives and Voluntary Retirement/Separation Schemes.In addition to fosteringinternal development,Arcelor Mittal continues tolook beyond the boundariesof the steel industry forfuture talent. Its global MBArecruitment programmecontinued in 2006 with therecruitment of 15 people.Arcelor Mittal UniversityOne of the key priorities in the wakeof the merger was the establishmentof the Arcelor Mittal University. Buildingon the best of the two predecessorcompanies’ learning and developmentprogrammes, the Arcelor Mittal Universityconstitutes one of the most advanced skillsdevelopment resources in the corporateworld. Its objectives are to developthe potential of everyone in the Group andbring on the next generation of leaders.It encourages people to:• Acquire new skills and competences.• Meet and exchange ideas and sharebest practices.• Allow themselves to be intellectuallystretched and challenged.• Develop a ‘bottom-up’ flow of ideas –so proposals for change are drivennot only from the top down.The new University held its first eventat the end of November 2006. It combinesthe former Arcelor University trainingcentre at Maizières-lès-Metz in North-Eastern France with the extensive e-learningand localised modular training coursescreated by Mittal Steel in an integrated,global offering. With blended programmesnow available for the entire ArcelorMittal workforce, the University isadditionally playing a valuable role in theprocess of integration and the buildingof an Arcelor Mittal culture.The 2007 course programme includesthe ‘Open Your Steel’, ‘Emerging Talent’,‘Operations Managers’ and ‘Campus’programmes, traditionally run by theformer Arcelor University as well as moreadvanced modules on change managementand strategic marketing. The distancelearning courses will be used to helpintroduce new technologies rapidly andeffectively. A global English languagetraining programme, delivered onlineand targeted at second and third levelmanagers, is already being accessedby several hundred people. Once mastered,the additional language skill is designedto act as a stepping stone to otherprogrammes – broadening the basefor future management assignments.

Arcelor Mittal Activity Report 2006 65The University is designed to providedevelopment opportunities for everyonewith people management responsibilities,spanning professional, functional ortechnical activities, and will be usedto help identify promising talent at everylevel. It will be closely aligned withperformance management. Targeted atmanagers across the Group, it is designedto accelerate leadership development andcapability, engage employees in careerplanning, and strengthen the Group’sposition as the employer of choice.Leadership DevelopmentThe Global Executive DevelopmentProcess (GEDP) has been deployedacross the Arcelor Mittal Group in 2006.GEDP is a performance managementreview process that not only assessesthe quality of leadership within allbusiness segments and functionsbut identifies the potential leaders oftomorrow – the so-called ‘high potentials’or ‘Hipos’. The process covers everylevel of management down to GeneralManager, assessing performanceand potential, mobility, English languagecapability and seeks nominations forArcelor Mittal University programmes.The succession management componenttargets a minimum of 10 to 15 keypositions in each business segment,identifying two successors for eachposition, and between 5 and 15 ‘Hipos’.For each successor or ‘Hipo’ a personaldevelopment plan is created and it picksout those considered for internal mobility.The GEDP lies at the heart of ArcelorMittal’s performance management process.It is the key to succession planning,salary increase, annual performance bonuspayout, long-term incentive plans andthe nomination of candidates for advancedmanagement development programmes.As part of the GEDP, young talentis groomed for higher roles. In 2006,around 150 managers were nominatedto attend management and leadershipprogrammes at six leading businessschools in the US and Europe.Every effort is also being madeto identify managers prepared to moveacross borders and to encouragemobility. The scale of the new organisationhas transformed career opportunities,providing unparalleled opportunitiesfor staff to progress via multiple functions,countries and regions. Internationalmobility is now viewed as a key componentof personal development and aprerequisite for career advancement.As part of the process of encouragingmobility, Arcelor Mittal is committedto making its internal job marketas transparent as possible. A preliminaryIntranet site – Job Offers for Managers –was launched in December 2006.It allows anyone within the new perimeterof the Group to apply for a vacancyin any country, profession or plant.An expanded – Job Market Online –tool will be launched in the secondquarter of 2007.In addition to fostering internaldevelopment, Arcelor Mittal continuesto look beyond the boundaries of the steelindustry for future talent. Its global MBArecruitment programme continued in2006 with the recruitment of 15 people.Partnership with Employeesand their RepresentativesBoth Arcelor and Mittal Steel havein recent years adopted a partnershipapproach with trades unions.Building and maintaining good relationswith employee representatives everywhereis one of management’s key goals.To that end, Arcelor Mittal has negotiateda new combined European WorksCouncil to replace the existing twoseparate European Works Councils withinboth former individual companies.This combined European Works Councilwill represent employees from bothformer companies and will form an integralpart of Arcelor Mittal’s overall socialdialogue. The new agreement is expectedto be in place shortly. The Group will alsoexpand the scope of the existing ArcelorInternational Framework Agreement to theextended perimeter of the merged Groupand design a partnering programmefor unions, management and HRin all business segments in developingmarkets. During the Employee RelationsKnowledge Management Programmes,it is customary to involve employeerepresentatives in debates on specifictopics that further improve understandingand strengthen partnership relations.Voluntary Retirement/SeparationSchemesContinued efficiency improvementsremain a key focus for management.Arcelor Mittal has completed acomprehensive productivity benchmarkingprogramme for all operating units,and work on restructuring and productivityimprovement will continue throughout2007. Through benchmarkingand knowledge transfer, overallemployment efficiency will be continuouslyimproved and with that the viabilityof individual plants strengthened.

66 Arcelor Mittal Activity Report 2006EnvironmentFor Arcelor Mittal, continuous improvement in its environmentalperformance is a key element in its commitment towardsSustainable Development. In order to achieve this, the companyhas put in place a management system to take care of Arcelor Mittal’simpact on the environment, so as to ensure that environmentalaspects comply with legislation, monitor performance and developmore environmentally-friendly methods of production.

Arcelor Mittal Activity Report 2006 67The Group Environment Departmentworks closely in collaboration with theregional production facilities to ensurea consistent and coordinated approachto Arcelor Mittal environmentalperformance across all operations.In 2006, focus during the integrationphase has been on:• Coordinating environmentalreporting and analysis;• Implementing common policiesand action plans;• Developing and implementingan environmental frameworkand guidance to regionalproduction facilities;• Supporting environmentalcompliance activities; and• Undertaking benchmarkingand trend analysis.InvestmentIn 2006, more than US$120 millionwas invested in environmental projectsaround the Group, many of whichare ongoing. Examples include:• In South Africa, the Vanderbiljparkfacility implemented a central wastewater treatment resulting in a zerodischarge operation and drasticallyreducing the fresh water intake by 60%.• Arcelor Mittal USA launched awindmill farm project at a former steelproduction facility in Lackawana,New York. The first phase will involvethe erection of eight 2.5MW windmillsfor a production capacity of around57,000 MWh/y.• In France, a flue gas flow treatmentat the sinter plant in Fos sur Mer wassuccessfully implemented. The processreduces dust, sulphur dioxide (SO 2)and dioxins emissions.• In Spain, the facilities in Olaberria,Zumárraga and Bergara focused onreducing their non-recovered residues.The Electric Arc Furnace (EAF) slaghad previously been sent to landfill.Joint work with the administration wasdeveloped to change the standards foruse of EAF slag in road constructionand investment was made in a uniqueslag treatment plant for the threefacilities for slag preparation for usein road construction. This will beoperational in 2007 and will resultin a substantial reduction innon-recovered residues.Many of these investments and processefficiencies have resulted in Arcelor Mittal’sproduction facilities receiving recognitionfor their environmental performance.Examples include:• Arcelor Mittal Gent, Belgium wasawarded the Environmental Charterof East Flanders granted to companieswho demonstrate a continuousimprovement of their environmentalperformance and often go beyondexisting legislation.• ACB in Bizkaia, Spain was oneof 12 companies nominated for theEuropean Business Awards for theEnvironment. The prize, awardedby the European Commission everytwo years, acknowledges companiesfor outstanding contributionsto sustainable development.Raising standardsGroup operations comply with localand legal regulatory requirementsand every effort is made to anticipatenew legislation by investing aheadof its implementation. Any breachesare recorded diligently and dealt withpromptly. Many operations are accreditedto ISO 14001 and Arcelor Mittal iscommitted to achieving 100% certification.To deliver this commitment, the Grouphas issued mandatory application of ISO14001 certification for all productionfacilities. The Group is currently reworkingthe compliance verification procedurebuilding on the strengths of the Arcelorand Mittal Steel approaches. Going forward,this compliance methodology will beintegrated into the global environmentaldatabase that is currently being developedto capture Group-wide data on airemissions, water quality, CO 2 and residues.A process of identifying projects and expertsto boost Clean Development Mechanism /Joint Implementation initiativesthrough the Group was started in 2006and common development strategy andguidelines are now being established.In addition, the second phase of theUltra Low CO 2 Steelmaking (ULCOS)programme has started. Co-financedby the European Union and the 48 partnersengaged in the programme, ULCOSaims at finding new production processesthat drastically reduce emissionsof CO 2 and other greenhouse gases.Five technologies have been selectedfor the Phase II experimentation.During 2006, Arcelor Mittal has beenactively engaging in developing mechanismsto ensure knowledge sharing acrossthe Group. A number of working groupshave been set up to ensure managersare exposed to and transfer, current bestpractice approaches. Examples include:• A monitoring campaign focusing ondiffuse dust was initiated in 2006 inorder to quantify building diffuse dustemissions in sinter plants, blast furnacesand steelmaking plants. The objectiveof the campaign is to improve theknowledge on diffuse dust emissions andto move facilities to take these emissionsinto account in their progress plans.• A biodiversity working group was createdto build on the best practice work ofmany of our Brazilian and WesternEuropean facilities. The objectives areto better understand the Arcelor Mittalcontribution and impact on biodiversity,to compile a database on biodiversity,and to recommend a Group-wideresponse to the findings.• The creation of an e-basedinformation exchange tool whichwill provide up-to-date informationto environmental managers acrossglobal operations on Environmentallegal framework; measurements;best process techniques; cleanerproduction; Biodiversity and studies.In March 2007, environmental managersfrom all regional operations will meet aspart of Arcelor Mittal’s internal KnowledgeManagement Programme (KMP).The focus will be on drafting a Group-wideEnvironment policy which will be publishedlater in the year and the developmentof key environmental objectives.The importance of raising awarenesson environmental issues extends beyondthe production facilities and in 2006,Arcelor Mittal announced its US$2million sponsorship of the ChinaEnvironmental Awareness Programme(CEAP), launched 18 December in Beijingby the United Nations DevelopmentProgramme (UNDP) and the Chinesegovernment. One of the programmesin the partnership will contribute to theprovision of capacity building inClean Development Mechanism (CDM)initiatives in 12 provinces in China,as part of the implementation of theMillennium Development Goals (MDG).The three-year campaign will raiseawareness about environmental issuesthrough media campaigns built aroundhigh-profile national events suchas the 2008 Beijing Olympics andthe Shanghai Expo in 2010.2007 PrioritiesMoving into 2007, Arcelor Mittalwill continue to focus on completionof the 2006 priority areas andin addition will focus on:• Ensuring all Arcelor Mittalproduction facilities are anticipatingand responding to upcomingenvironmental legislation mosteffectively. A Group-wide legislationwatch including Europe, USA andChina will be implementedto make sure local issues andinitiatives are handled appropriatelyand supported by knowledgeof the most environmentally efficientgovernments;• Developing a Group-widecommunication strategy to handlelocal issues and needs in regardto regulations, process techniques,measurements, cleaner production;• Analysing the performanceresults from environmental reportingto detect potential improvementopportunities and conductbenchmarking and trend analysis.

68 Arcelor Mittal Activity Report 2006CommunitiesFor Arcelor Mittal, communities are essential to delivering its businessstrategy. Acting responsibly does not simply mean donating goods and services,or time, to specific projects – although this is happening everywhere thatthe Group operates. It also implies that Arcelor Mittal has a wider dutyto ensure that the communities in which it operates prosper. As a result,the Group must not only ensure the economic wellbeing of those communities,but also develop adequate infrastructure, health care and education.Social InvestmentDuring 2006, Arcelor Mittal businesssegments continued to engage in a widerange of social investment initiatives,providing extensive support in education,healthcare, sports, enterprise andcultural activities.In 2006, Arcelor Mittal contributedUS$47 million in charitable contributions,sponsorship and to social investmentprojects. An additional US$2.6 millionwas contributed in the form ofin-kind contributions – productsand employee-time.Examples of social investmentin 2006 include:• In Brazil, an ambitious target setin 2004 to register 250,000 people asbone marrow donors was not only metbut exceeded in 2006. By the end ofthe year, the number of donors on theREDOME register topped 334,000.Many thousands of people at theGroup’s Belgo, Vega do Sul and Acesitaplants are among those who havevolunteered in the last two-and-a-halfyears. The Group’s support for bonemarrow transplant programmes goesback to 1988. It has since contributedto the development of stem cell donorregisters in France, Spain, Italy,Belgium and Luxembourg.• In the US, the Cleveland Ohio plantcontinued to play a large role in the localcommunity. Financial help for a varietyof causes –from the United Way toHarvest for Hunger – was supportedby countless hours of voluntary workby employees. Other projects rangedfrom supporting the Boys & Girls Clubsof Cleveland (through a combinationof money and employee volunteering)to improving the Cuyahoga RiverValley environment.• In China, the first set of scholarshipswas granted in May 2006 undera new scholarship programme forstudents at Hunan Province’s CentralSouth University. The scholarships,aimed at promoting creativity andinnovation, supports 80 scholars a yearin undergraduate and post-graduateprogrammes and a further 40 engagedin doctoral and post-doctoral research.• In Kazakhstan, extensive and broadranging social investment continuedin 2006, this included the donationof 40 ambulances to the KaragandaAmbulance Centre and sponsorshipof a wide range of sports and culturalevents for the City of Temirtau.• In Europe, Arcelor Mittal continuedits support for a range of locally driveninitiatives. This included support givento sports and youth developmentinitiatives in Spain; funding of medicalequipment in the Czech Republicand development of an educationalmulti-media laboratory in Poland.Case StudyScience And Education Centre– South AfricaIn order to address the country-wideshortage of skills in the engineeringfields and to instill an interest in thescience disciplines, Arcelor MittalSouth Africa developed an innovativeconcept to provide centralised facilitiesin a Science Centre of Excellencefor the teaching of mathematics andscience to learners and educatorsin the Vaal region.The project was developed in partnershipwith the Gauteng Department ofEducation. Currently 1250 grade 10learners from 12 different schools and30 teachers attend mathematics andscience classes at the Centre. Thelearners and teachers are transportedto the Science Centre daily, which isequipped with ultra modern classrooms,laboratories and an interactive scienceexhibit centre, where learners are giventhe opportunity to learn “hands on”under the guidance of highly skilledand experienced educators.The Centre opened in July 2006 andafter 15 weeks of lessons astoundingresults have been achieved. Forexample, a school that achieved 6.8%average in the initial assessment testobtained 69.8% in the final test. Ofmore significance is the fact that themajority of learners are showing agenuine interest in the subjects and arereally enjoying the classes.The project will be expanded during2007 to include an additional 600learners and 45 teachers from 15 newschools. Including the refurbishment ofthe facilities, an amount of R8.5 million(US$1.1 million) was invested in theproject during 2006.

Arcelor Mittal Activity Report 2006 69US$47Charity contribution in 2006 (millions).

70 Arcelor Mittal Activity Report 2006CommunitiescontinuedArcelor Mittal FoundationThe scale of Arcelor Mittal’s businessalso means operating across a spectrumof economic environments. Arcelor Mittalrecognises its responsibility to supportsocial and educational projects thatcan help build capacity, acceleratedevelopment and improve the qualityof life of local communities.As a consequence, and in order to provideadded focus to this diverse programmeof activities, Arcelor Mittal has decidedto create a Foundation to be called“Arcelor Mittal Foundation”. It willcoordinate the Group’s social projectsand ensure a consistent approach to socialinvestment worldwide. Its mission willbe to promote Arcelor Mittal’s commitmentto society and sustainable development,focusing in particular on the communitieswhere it operates.The Foundation’s role will be to definethe core strategy for the Group’s socialengagement activities, lay down criteriafor the business segments to follow,monitor spending and evaluate the impactof each project. As a first step, all currentactivities are being identified and assessed.The new approach has a numberof objectives. It will generate a programmeof activities that is more closelyaligned and coherent. By developingspecific competence in certain fields,the Foundation will bring added impactto the programme – which will moreidentifiably bear the imprint of ArcelorMittal. It will also help to ensuremaximum efficiency in the use of funds.As part of the process, the Foundationwill seek to develop partnerships withNon-Government Organisations (NGOs)to drive the programme forward.It is recognised that local needsand priorities differ. For that reason,most ideas for new programmeswill continue to be generated locally –either by the local business segmentsor communities. Some may evolvethrough contact with NGOs or otherfoundations. Each business segment hasa nominated ‘correspondent’ whosefunction will be to liaise with the Foundation– both in generating ideas and carryingout the programmes.Candidate projects will be analysedaccording to clearly set criteria.Those that are accepted will then becontinuously monitored and evaluatedfor their effectiveness. There is likelyto be a heavy emphasis on projects aimedat ‘self-sustainability’.


72 Arcelor Mittal Activity Report 2006RecyclingSteel is indefinitely recyclable and may be considered as a “green”material. In some applications, 90% of the steel used is recycled.Arcelor Mittal develops increasingly innovative and eco-friendly steel,from the perspectives of both production and use by customerin the automotive, packaging and construction sectors.

Arcelor Mittal Activity Report 2006 7390 %

74 Arcelor Mittal Activity Report 2006Corporate GovernanceMittal Steel and Arcelor entered into a Memorandumof Understanding on 25 June 2006 through which the twoparties agreed on certain corporate governance mattersrelating to the combined Group. In particular, the agreementincludes special governance mechanisms designedto promote the integration of Mittal Steel and Arcelor.A. Directors and Senior ManagementThe members of the Mittal Steel Board of Directors as of 31 December 2006 are as set forth below:Name Age 4 Date Joined Board Class / Term Position within Mittal SteelLakshmi N. Mittal 56 May 1997 Class A – 2009 Chairman of Mittal Steel’s Board of Directorsand Chief Executive OfficerJoseph J. Kinsch 2 / 3 73 October 2006 Class C – 2009 President of Mittal Steel’s Board of DirectorsVanisha Mittal Bhatia 26 December 2004 Class A – 2009 Member of Mittal Steel’s Board of DirectorsNarayanan Vaghul 1 / 3 70 July 1997 Class C – 2009 Member of Mittal Steel’s Board of DirectorsWilbur L. Ross 1 / 3 69 April 2005 Class C – 2009 Member of Mittal Steel’s Board of DirectorsLewis B. Kaden 2 / 3 64 April 2005 Class C – 2009 Member of Mittal Steel’s Board of DirectorsFrançois H. Pinault 3 70 June 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsJosé Rámon Álvarez Rendueles 1 / 3 66 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsSergio Silva de Freitas 2 / 3 63 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsGeorges Schmit 53 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsEdmond Pachura 1 / 3 72 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsMichel Angel Marti 3 59 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsManuel Fernández López 3 60 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsJean-Pierre Hansen 2 / 3 58 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsJohn Castegnaro 3 61 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsAntoine Spillmann 43 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsHRH Prince Guillaume de Luxembourg 3 43 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsRomain Zaleski 73 October 2006 Class C – 2009 Member of Mittal Steel’s Board of DirectorsMittal Steel continues to put strongemphasis on corporate governance.Mittal Steel has thirteen independentdirectors on its Board of Directors.Mittal Steel’s Audit Committee andMittal Steel’s Appointments, NominationCommittee and Remuneration andCorporate Goverance Committeeare each comprised exclusively of fourindependent members.1Audit Committee.2 Appointments, Remunerations and CorporateGovernance Committee.3“Non-executive” and independent director.4Age as of 31 December 2006.

Arcelor Mittal Activity Report 2006 75Senior ManagementThe members of Mittal Steel’s senior management as of 31 December 2006 are as set forth below:Name Age 1 PositionBhikam Agarwal 54 Executive Vice President, Responsible for Financial Controlling and ReportingRoeland Baan 49 Executive Vice President, Responsible for South and Central Africa and Pipes and TubesGilles Biau 61 Executive Vice President, Group Human Resources Co-HeadAlain Bouchard 60 Executive Vice President, Responsible for Purchasing function on Worldwide basisJosé Armando Campos 58 Executive Vice President, Responsible for Flat South AmericaNarendra Chaudhary 62 Executive Vice President, Responsible for Carbon Steel Asia, Mediterranean,Black Sea Basin and BalkansDavinder Chugh 50 Senior Executive Vice President, Responsible for Shared ServicesChristophe Cornier 54 Executive Vice President, Responsible for Flat EuropePhilippe Darmayan 54 Executive Vice President, Responsible for Arcelor Mittal Steel Solutions & Services (AM3S)Bernard Fontana 45 Executive Vice President, Responsible for Automotive WorldwideJean-Yves Gilet 50 Executive Vice President, Responsible for Stainless Steel WorldwideRoland Junck 51 Member of the Group Management Board, Advisor to the CEOSudhir Maheshwari 43 Executive Vice President, Responsible for Finance and M&AAditya Mittal 30 Chief Financial Officer, Member of the Group Management Board, Flat Products AmericasLakshmi N. Mittal 56 Chief Executive Officer, Member of the Group Management BoardMalay Mukherjee 58 Member of the Group Management Board, Stainless, Mining, Asia & AfricaCarlo Panunzi 57 Executive Vice President, Responsible for Long AmericasMichael Pfitzner 57 Executive Vice President, Responsible for Commercial CoordinationGerhard Renz 59 Executive Vice President, Responsible for Long EuropeMichael Rippey 49 Executive Vice President, Responsible for USALou Schorsch 57 Executive Vice President, Responsible for Flat AmericasBill Scotting 48 Executive Vice President, Responsible for Performance EnhancementGonzalo Urquijo 45 Member of the Group Management Board, Long Products and DistributionAndré van den Bossche 63 Executive Vice President, Responsible for MarketingInder Walia 48 Executive Vice President, Responsible for Human ResourcesMichel Wurth 52 Member of the Group Management Board, Flat Products Europe1Age as of 31 December 2006.

76 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedB. CompensationThe total annual compensation of the members of Mittal Steel’s Board of Directors for 2005 and 2006 was as follows:Year Ended 31 December(All amounts in US$ thousands except option information) 2005 2006 1Base salary and/or directors fees 4,369 3,760Short-term performance-related bonus — 3,288Long-term incentives (number of options) 235,000 175,0001Mr. A. Mittal resigned from Mittal Steel’s Board ofDirectors on 30 October 2006, but continued inhis role as Chief Financial Officer of Mittal Steel.His compensation is included only for the periodfrom January 2006 to October 2006.2 Mr. Mukherjee resigned from Mittal Steel’s Boardof Directors on 12 April 2005, but continued in hisrole as Chief Operating Officer of Mittal Steel. Hiscompensation is included only for the period fromJanuary 2005 to March 2005.3 Mr. Rozental resigned from Mittal Steel’sBoard of Directors on 30 October 2006.4 Mr. Ruiz resigned from Mittal Steel’sBoard of Directors on 12 April 2005.5 Mr. Reddy resigned from Mittal Steel’sBoard of Directors on 30 October 2006.6 Mr. Lopez resigned from Mittal Steel’sBoard of Directors on 30 October 2006.7 Mr. Ross was elected to Mittal Steel’sBoard of Directors on 12 April 2005.8 Mr. Kaden was elected to Mittal Steel’sBoard of Directors on 12 April 2005.9Mr. Pinault was elected to Mittal Steel’sBoard of Directors on 30 June 2006.10Mr. Kinsch was elected to Mittal Steel’s Boardof Directors on 30 October 2006. Mr. Kinsch hasbeen paid as Chairman of Arcelor’s Boardof Directors in 2006.11Mr. Álvarez-Rendueles Medina was elected toMittal Steel’s Board of Directors on 30 October2006. Mr. Álvarez-Rendueles Medina has beenpaid as Vice Chairman of Arcelor’s Board ofDirectors in 2006.12Mr. Silva de Freitas was elected to Mittal Steel’sBoard of Directors on 30 October 2006. Mr. Silvade Freitas has been paid as an Arcelor BoardMember in 2006.13Mr. Schmit was elected to Mittal Steel’s Board ofDirectors on 30 October 2006. Mr. Schmit hasbeen paid as an Arcelor Board Member in 2006.14Mr. Pachura was elected to Mittal Steel’sBoard of Directors on 30 October 2006.Mr. Pachura has been paid as an Arcelor BoardMember in 2006.15Mr. Marti was elected to Mittal Steel’s Boardof Directors on 30 October 2006. Mr. Marti hasbeen paid as an Arcelor Board Member in 2006.16Mr. Fernández López was elected to Mittal Steel’sBoard of Directors on 30 October 2006. Mr.Fernández López has been paid as an ArcelorBoard Member in 2006.17Mr. Hansen was elected to Mittal Steel’s Boardof Directors on 30 October 2006. Mr. Hansen hasbeen paid as an Arcelor Board Member in 2006.18Mr. Castegnaro was elected to Mittal Steel’s Boardof Directors on 30 October 2006. Mr. Castegnarohas been paid as an Arcelor Board Member in2006.19Mr. Spillmann was elected to Mittal Steel’s Boardof Directors on 30 October 2006.20HRH Prince Guillaume de Luxembourg was electedto Mittal Steel’s Board of Directors on 30 October2006. HRH Prince Guillaume de Luxembourg hasbeen paid as an Arcelor Board Member in 2006.21Mr. Zaleski was elected to Mittal Steel’s Boardof Directors on 30 October 2006.

Arcelor Mittal Activity Report 2006 77The annual compensation of the members of Mittal Steel’s Board of Directors was as follows:2005 2006 2005 2006 2005 2006Short-term Short-term Long-term Long-termPerformance Performance Number Number(All amounts in US$ thousands except option information) Related Related of Options of OptionsLakshmi N. Mittal 2,194 2,005 - 1,677 100,000 100,000Aditya Mittal 1 1,245 942 - 1,611 75,000 75,000Vanisha Mittal Bhatia 18 23 - - - -Malay Mukherjee 2 311 - - - 60,000 -Narayanan Vaghul 109 139 - - - -Ambassador Andrés Rozental 3 134 142 - - - -Fernando Ruiz Sahagun 4 22 - - - - -Muni Krishna T. Reddy 5 110 119 - - - -René Lopez 6 74 82 - - - -Wilbur L. Ross, Jr. 7 73 105 - - - -Lewis B. Kaden 8 79 123 - - - -François H. Pinault 9 - 80 - - - -Joseph Kinsch 10 - - - - - -José Ramón Álvarez-Rendueles Medina 11 - - - - - -Sergio Silva de Freitas 12 - - - - - -Georges Schmit 13 - - - - - -Edmond Pachura 14 - - - - - -Michel Angel Marti 15 - - - - - -Manuel Fernández López 16 - - - - - -Jean-Pierre Hansen 17 - - - - - -John Castegnaro 18 - - - - - -Antoine Spillmann 19 - - - - - -HRH Prince Guillaume de Luxembourg 20 - - - - - -Romain Zaleski 21 - - - - - -Total 4,369 3,760 - 3,288 235,000 175,000The Compensation for the membersof the Board of Directors for the year2006 who were nominated from Arcelor willbe paid after its approval by shareholdersin the Annual General Meeting of Arcelorwhich will be held on 27 April 2007.As of 31 December 2005 and 2006,Mittal Steel did not have outstanding anyloans or advances to members of its Boardof Directors, and as of 31 December2006, Mittal Steel had not given anyguarantees for the benefit of any memberof its Board of Directors.

78 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedThe following table provides a summary of the options outstanding and the exercise of the options granted to Mittal Steel’sBoard of Directors (in 2001, 2003 and 2004 no options were granted to members of Mittal Steel’s Board of Directors):WeightedAverageGranted in Granted in Granted in Granted in Granted in Exercise Price1999 2000 2002 2005 2006 Total (USD)Lakshmi N. Mittal 80,000 80,000 80,000 100,000 100,000 440,000 18.35Aditya Mittal 1 7,500 7,500 25,000 75,000 75,000 190,000 25.78Vanisha Mittal Bhatia — — — — — — —Malay Mukherjee 2 40,000 40,000 50,000 60,000 — 190,000 13.99Narayanan Vaghul 3 — — — — — — —Ambassador Andrés Rozental 4 / 5 — — — — — — —Fernando Ruiz Sahagun 6 / 7 — — 3,333 — — 3,333 2.26Muni Krishna T. Reddy 8 — — — — — — —René Lopez 9 — — — — — — —Wilbur L. Ross 10 — — — — — — —Lewis B. Kaden 11 — — — — — — —François H. Pinault 12 — — — — — — —Joseph Kinsch 13 — — — — — — —José Ramón Álvarez-Rendueles Medina 14 — — — — — — —Sergio Silva de Freitas 15 — — — — — — —Georges Schmit 16 — — — — — — —Edmond Pachura 17 — — — — — — —Michel Angel Marti 18 — — — — — — —Manuel Fernández López 19 — — — — — — —Jean-Pierre Hansen 20 — — — — — — —John Castegnaro 21 — — — — — — —Antoine Spillmann 22 — — — — — — —HRH Prince Guillaume de Luxembourg 23 — — — — — — —Romain Zaleski 24 — — — — — — —Total 127,500 127,500 158,333 235,000 175,000 823,333 18.99Exercise price (USD) 11.94 8.57 2.26 28.75 33.755 — —Term (in years) 10 10 10 10 10 — —Expiration date 14 September 2009 1 June 2010 5 April 2012 23 August 2015 1 September 2016 — —

Arcelor Mittal Activity Report 2006 79The total annual compensationof Mittal Steel’s senior managementfor 2006 was US$16 million in basesalary and US$21 million in short-termperformance related bonuses.As of 31 December 2006, approximatelyUS$2.0 million was accrued by MittalSteel to provide pension benefits to itssenior management. During 2006,no loans or advances to Mittal Steel’ssenior management were outstanding.As of 31 December 2005, US$0.2million of such loans was outstanding,which was also the maximum amountoutstanding during 2005.Options were granted to seniormanagement for 2005 and 2006in accordance with the Mittal SteelGlobal Stock Option Plan describedin the following page.1Mr. A. Mittal resigned from Mittal Steel’s Boardof Directors on 30 October 2006, but continued inhis role as Chief Financial Officer of Mittal Steel.2Mr. Mukherjee resigned from Mittal Steel’sBoard of Directors on 12 April 2005, butcontinued in his role as Chief Operating Officerof Mittal Steel and subsequently was appointedto the Group Management Board.3Mr. Vaghul exercised all his vested options in 2005.4Mr. Rozental resigned from Mittal Steel’sBoard of Directors on 30 October 2006.5Mr. Rozental exercised the majority of his vestedoptions in 2005, except for 3,333 options grantedin 2002 which were exercised in 2006.6Mr. Ruiz resigned from Mittal Steel’sBoard of Directors on 12 April 2005.7Mr. Ruiz exercised the majority of his vestedoptions in 2005, except for 3,333 optionsgranted in 2002.8Mr. Reddy resigned from Mittal Steel’sBoard of Directors on 30 October 2006.9Mr. Lopez resigned from Mittal Steel’sBoard of Directors on 30 October 2006.10Mr. Ross was elected to Mittal Steel’sBoard of Directors on 12 April 2005.11Mr. Kaden was elected to Mittal Steel’sBoard of Directors on 12 April 2005.12Mr. Pinault was elected to Mittal Steel’sBoard of Directors on 30 June 2006.13Mr. Kinsch was elected to Mittal Steel’sBoard of Directors on 30 October 2006.14Mr. Álvarez-Rendueles Medina was electedto Mittal Steel’s Board of Directors on30 October 2006.15Mr. Silva de Freitas was elected to Mittal Steel’sBoard of Directors on 30 October 2006.16Mr. Schmit was elected to Mittal Steel’sBoard of Directors on 30 October 2006.17Mr. Pachura was elected to Mittal Steel’sBoard of Directors on 30 October 2006.18Mr. Marti was elected to Mittal Steel’sBoard of Directors on 30 October 2006.19Mr. Fernández López was elected to Mittal Steel’sBoard of Directors on 30 October 2006.20Mr. Hansen was elected to Mittal Steel’sBoard of Directors on 30 October 2006.21Mr. Castegnaro was elected to Mittal Steel’sBoard of Directors on 30 October 2006.22Mr. Spillmann was elected to Mittal Steel’sBoard of Directors on 30 October 2006.23HRH Prince Guillaume de Luxembourg waselected to Mittal Steel’s Board of Directorson 30 October 2006.24Mr. Zaleski was elected to Mittal Steel’sBoard of Directors on 30 October 2006.

80 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedStock Option PlanIn 1999, Mittal Steel established theMittal Steel Global Stock Option Plan(“MittalShares”). Under the terms ofMittalShares, Mittal Steel may grantoptions to purchase common stock tosenior management of Mittal Steel and itsaffiliates for up to 20,000,000 shares ofcommon stock (increased from 6,000,000shares to 10,000,000 shares of commonstock after shareholder approval in 2003and increased from 10,000,000 sharesto 20,000,000 shares of common stockafter shareholder approval in 2006). Theexercise price of each option equals notless than the fair market value of MittalSteel stock on the date of grant, with amaximum term of 10 years. Options aregranted at the discretion of the MittalSteel’s Appointments, Remuneration andCorporate Governance Committee or itsdelegate. The options vest either ratablyupon each of the first three anniversaries ofthe grant date, or, in total, upon the death,disability or retirement of the participant.On 23 August 2005, Mittal Steelgranted 3,908,773 options to a groupof key employees at an exercise price ofUS$28.75. Of this option grant, 520,566options (including 100,000 for Significantshareholder) were allocated to seniormanagement. The options expire on 23August 2015.On 1 September 2006, Mittal Steelgranted 3,999,223 options to a groupof key employees at an exercise price ofUS$33.755. Of this option grant, 550,300options (including 100,000 for Significantshareholder) were allocated to seniormanagement. The options expire on1 September 2016.Pursuant to the transitional provisions ofIFRS 2, “Share-Based Payments”, onlyoptions granted after 7 November 2002were recognised as an expense at theirfair value. Mittal Steel determines the fairvalue of the options at the date of grantusing the Black-Scholes model. The fairvalues for options and other share-basedcompensation is recorded as an expensein the consolidated income statement overthe relevant vesting or service periods,adjusted to reflect actual and expectedlevels of vesting.In addition, Arcelor has stock option planswith 1,485,393 options outstanding asof 31 December 2006 with an exerciseprice ranging from €9.67 to €34.43 peroption. Mittal Steel recorded compensationexpense of US$4 million with respect tothese stock option plans during 2006.The fair value of each option grant of Mittal Steel class A common shares is estimated on the date of grant using the Black-ScholesModel with the following weighted-average assumptions used:Year of grantYear of grant2005 2006Exercise price 28.75 33.76Dividend yield 1.44% 1.45%Expected annualised volatility 52% 60%Discount rate - Bond equivalent yield 4.50% 4.63%Expected life in years 6 6Fair value of options (per share) 13 30

Arcelor Mittal Activity Report 2006 81The status of MittalShares as of 31 December 2006 is summarised below:Range ofWeighted AverageNumber of options Exercise Prices (USD) Exercise Price (USD per option)Outstanding, December 31, 2003 3,339,334 2.26 - 11.94 7.32Exercised (1,384,118) 2.26 - 11.94 7.76Forfeitures (244,000) 2.26 - 11.94 9.07Outstanding, December 31, 2004 1,711,216 2.26 - 11.94 6.72Granted 3,908,773 28.75 28.75Exercised (351,850) 2.26 - 11,94 5.87Forfeitures (210,833) 2.26 - 28.75 27.87Outstanding, December 31, 2005 5,057,306 2.26 - 28.75 22.92Granted 3,999,223 33.76 33.76Exercised (523,304) 2.26 - 28.75 17.83Cancelled (4,000) 33.76 33.76(Forfeitures) (78,257) 33.76 33.76Outstanding, December 31, 2006 8,450,968 2.26 - 33.76 28.27Exercisable, December 31, 2006 2,062,787 2.26 - 28.75 17.27Exercisable, December 31, 2005 1,352,366 2.26 - 28.75 6.96Exercisable, December 31, 2004 1,321,721 2.26 - 11.94 8.03The following table summarises information about stock options at 31 December 2006:Options OutstandingWeighted averageOptions exercisableExercise Price in USD Number of options contractual life (in years) (number of options)11.94 315,599 2.71 315,5998.57 330,100 3.42 330,1002.26 442,118 5.27 442,11828.75 3,442,185 8.65 974,97033.76 3,920,966 9.67 -2.26 – 33.76 8,450,968 8.66 2,062,787At 31 December 2006 the stock options granted under the MittalShares are exercisable as follows:Average ExerciseYear Options Price (USD) 12007 2,062,787 17.272008 4,692,660 26.012009 7,180,807 27.862010 8,235,098 29.322011 7,971,773 30.001 Based on exercise prices of USD 11.94, USD 8.57,USD 2.26 and USD 28.75 and USD 33.76for 1999, 2000, 2002, 2005 and 2006 respectively.

82 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedC. Board PracticesThe following summarises aspects ofMittal Steel’s Board Practices and corporategovernance practices more generally.Mittal Steel / Arcelor Memorandumof UnderstandingMittal Steel, the Significant shareholderand Arcelor entered into a Memorandumof Understanding on 25 June 2006(the “Memorandum of Understanding”or “MOU”), on the basis of which Arcelor’sBoard of Directors recommended MittalSteel’s offer for Arcelor and pursuantto which, among other things, the partiesagreed on certain corporate governancematters relating to the combined group.In particular, the Memorandum ofUnderstanding includes certain specialgovernance mechanisms designed topromote the integration of Mittal Steeland Arcelor during an initial three-yeartransitional period beginning as from1 August 2006, which period is referredto herein as the Initial Term. MittalSteel and Arcelor agreed to change andunify their respective corporate governancestructures and rules until Mittal Steelis merged into Arcelor in accordance withthe MOU, following which the survivingentity, which will be the parent companyof the group, will be renamed. It iscurrently expected that the surviving entitywill be renamed “Arcelor Mittal”, and thisname is used in the summary herein.Since the implementation of theMemorandum of Understanding, MittalSteel has been governed by a Board ofDirectors and a Group Management Board.Until Mittal Steel is merged into Arcelor,the composition and operation of eachof Mittal Steel’s and Arcelor’s Board ofDirectors, Group Management Board andManagement Committee will be identical.Board of Directors, Group ManagementBoard and Management Committeeof Mittal SteelThe Memorandum of Understandingprovides that each of Mittal Steel,Arcelor and Arcelor Mittal will be governedby a “Board of Directors”and a“Management Board”, subsequentlyrenamed “Group Management Board”.The Memorandum of Understandingfurther provides that during the InitialTerm, the Board of Directors of eachof Arcelor, Mittal Steel and Arcelor Mittalwill have the following characteristics:• Each initial Board of Directors wouldbe composed of 18 non-executivemembers, the majority of whomwould be independent.• Six members would be nominatedby Mittal Steel, three of whom wouldbe independent.• Six members would be from the(then-existing) Arcelor Board of Directors.• Three members would be fromthe (then-existing) Arcelor Boardof Directors representing then-existingArcelor major shareholders.• An additional three members wouldbe employee representatives.In addition, during the Initial Term,the Board of Directors will appoint onedirector as Chairman and one directoras President of the Board of Directors.Mr. Joseph J. Kinsch is currently theChairman of the Board of Directorsof Arcelor, while Mr. Lakshmi N. Mittalis currently the President of the Boardof Directors and CEO of Arcelor. Followingthe merger of Mittal Steel into Arcelor,Mr. Kinsch shall be the Chairman of theBoard of Directors of Arcelor Mittal and Mr.Mittal shall be the President of the Boardof Directors and CEO of Arcelor Mittal.In addition, the Memorandum ofUnderstanding provides that upon theretirement of Mr. Joseph Kinsch, Mr.Lakshmi N. Mittal would become theChairman of Arcelor Mittal and Mr. JosephKinsch would propose the successorPresident, who shall be an independentdirector or a former employee of Arcelor.The proposed successor President willserve as President for so long as heor she is a director and the Significantshareholder has agreed to vote for hisor her renewal as a director, except in caseof gross negligence or willful misconductin the exercise of his or her functionsas director or in the event that theAppointments, Remuneration and CorporateGovernance Committee vetoes his or hernomination. Moreover, upon retirement,death or incapacity of Mr. Lakshmi N.Mittal, he shall be replaced by any otherrepresentative designated by the Significantshareholder from time to time.On 5 November 2006, Mr. Roland Junckresigned as Chief Executive Officerof Mittal Steel in the interest of Mittal Steeland its stakeholders. Mr. Junckhas since remained a member of the GroupManagement Board. On the same date,Mr. Lakshmi N. Mittal was appointeda member of the Group Management Boardand Chief Executive Officer of Mittal Steeland Mr. Mittal resigned as a memberof the Appointments, Remuneration andCorporate Governance Committee.Mr. Mittal has remained as Chairmanof the Board of Directors. Effective thesame date, Mr. Sergio Silva de Freitas wasappointed by the Board of Directors as Mr.Mittal’s successor on the Appointments,Remuneration and Corporate GovernanceCommittee. The proposal to appointMr. Mittal as Chief Executive Officerof Mittal Steel and Arcelor was unanimouslyapproved by the Boards of Directorsof Mittal Steel and Arcelor. As aconsequence, the Board of Directors hasone “executive” director, insteadof being composed exclusively of“non-executive” directors. The GeneralMeeting of Shareholders of Mittal Steelwill be asked to ratify this appointmentat the first General Meeting of Shareholdersto be held in 2007.The Board of Directors is in chargeof the overall management of MittalSteel. The Board of Directors is currentlycomprised of 17 “non-executive” directorsand one “executive” director. The Chairmanand Chief Executive Officer of Mittal Steel,Mr. Lakshmi N. Mittal, is the sole“executive” director.

Arcelor Mittal Activity Report 2006 83The Memorandum of Understandingprovides that the directors will be electedand removed by the General Meetingof Shareholders, by a simple majorityof votes cast. Except as specificallydescribed below, no shareholder will havespecial rights to nominate, elect or removedirectors. All directors will be electedby the General Meeting of Shareholdersfor three-year terms. Following the InitialTerm, and subject to the provisionsof Arcelor Mittal’s Articles of Association,the Significant shareholder will be entitledto representation on Arcelor Mittal’sBoard of Directors in proportion toits shareholding.The Group Management Board is entrustedwith the day-to-day management of MittalSteel. Mr. Lakshmi N. Mittal, the ChiefExecutive Officer, is the Chairman of theGroup Management Board. The membersof the Group Management Board areappointed and dismissed by the Boardof Directors. As the Group ManagementBoard is not a corporate body createdby Dutch law or Mittal Steel’s Articlesof Association, the Group ManagementBoard exercises only the authority grantedto it by the Board of Directors. Anyreferences in Mittal Steel’s Articles ofAssociation to the “managing board”are references to its Board of Directors.In establishing Mittal Steel’s strategicdirection and corporate policies, Mr.Lakshmi N. Mittal is supported by membersof our senior management, who havesubstantial professional and worldwide steelindustry experience. Some of the membersof our senior management team are alsomembers of the Group Management Board.The Group Management Board is assistedby a Management Committee comprisedof the members of the Group ManagementBoard and 20 other senior executives.The Management Committee discussesand prepares group decisions on mattersof group-wide importance, integratesthe geographical dimension of the Group,ensures in-depth discussions with MittalSteel’s operational and resources leadersand shares information about the situationof the Group and its markets.Operation of the Board of DirectorsThe required quorum for meetings of theBoard of Directors is a majority of thedirectors, including at least the Chairman,the President and a majority of theindependent directors being present orrepresented.Each director has one vote and no directorhas a casting vote. Decisions of theBoard of Directors are made by a majorityof the directors present and representedat a quorate meeting, except as otherwiserequired by Dutch law.During the Initial Term, the agendaof each meeting of the Board of Directorswill be jointly agreed by the Chairmanand the President of the Board of Directorsand will include any matters proposedto be included on the agenda jointly by theChairman and the President. In the eventof a disagreement, the Chairman and thePresident will work together to try to resolveany such disagreement. After the expirationof the Initial Term, the Chairman andthe President will use their reasonablebest efforts to agree on the agenda.Director IndependenceThirteen of the 18 members of the Boardof Directors are independent. A directoris considered to be “independent”if (a) he or she is independent within themeaning of the Listed Company Manualof the New York Stock Exchange, Inc.,which is referred to as the Listed CompanyManual, as it may be amended from timeto time, or any successor provision, subjectto the exemptions available for foreignprivate issuers with respect to the directorindependence requirements under theListed Company Manual, and (b) he or sheis unaffiliated with any shareholder owningor controlling more than two percent of thetotal issued share capital of Mittal Steel.For these purposes, a person is deemedaffiliated to a shareholder if he or she is anexecutive officer, a director who also is anemployee, a general partner, or a managingmember of such shareholder.Separate Meeting ofNon-executive DirectorsThe non-executive members of the Boardof Directors schedule meetings withoutthe presence of management. There isno minimum number of meetings that thenon-executive directors must hold per year.During 2006, the non-executive directorsof Mittal Steel held three meetings separatefrom the executive director(s). The presidingindependent director at each of thesemeetings was chosen at the meeting.Communications with theBoard of DirectorsPursuant to a process adopted by theBoard of Directors, a shareholder or anyother person may send communicationsdirectly to the Board of Directors throughMittal Steel’s website at http://www.mittalsteel.com/dynamic/dynamicdefault.asp?id=questionable.Significant Shareholder Rightof Opposition and Right of BoardRepresentationThe Memorandum of Understandingprovides that during the Initial Term,with respect to Board of Directors’decisions that require shareholdersapproval, the Significant shareholderwill vote in accordance with the positionexpressed by the Board of Directors, unlessthe Significant shareholder opposes anysuch position, in which case the Significantshareholder can vote as it wishes, subjectto the following requirements. Duringthe Initial Term, if Mr. Lakshmi N. Mittalopposes any decision of the Boardof Directors on a matter that does notrequire shareholders approval and that wasnot proposed by him, Mr. Lakshmi N. Mittalwill have the right to request that suchaction first be approved by a shareholders’meeting, and the Significant shareholderwill have the right to vote at such meetingas it sees fit. The Board of Directors willnot approve any action that has beenrejected by such shareholders’ meeting.The Memorandum of Understandingfurther provides that during the Initial Term,and subject to the Significant shareholderowning or controlling at least 15% of theoutstanding share capital of Mittal Steelor Arcelor Mittal, the Significant shareholderis entitled to elect to Mittal Steel’s orArcelor Mittal’s Board of Directors, as thecase may be, up to (and not more than)six directors, including three directorswho are affiliated (directly or indirectly)with the Significant shareholder and threeindependent directors. Following the InitialTerm, and subject to the provisionsof Mittal Steel’s or Arcelor Mittal’s Articlesof Association, as the case may be, theSignificant shareholder will be entitled torepresentation on Mittal Steel’s or ArcelorMittal’s Board of Directors, as the case maybe, in proportion to its shareholding.Board of Directors’ CommitteesFollowing the implementationof the Memorandum of Understanding,the Board of Directors has twocommittees: an Audit Committeeand an Appointments, Remunerationand Corporate Governance Committee.

84 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedAudit CommitteeThe Audit Committee is composedof four independent directors, withindependence defined as set out aboveand also in Rule 10A-3 under the ExchangeAct. The members are appointed by theBoard of Directors. The Audit Committeemakes decisions by a simple majoritywith no member having a casting vote.The primary function of the AuditCommittee is to assist the Boardof Directors in fulfilling its oversightresponsibilities by reviewing:• the financial reports and other financialinformation provided by Mittal Steelto any governmental body or the public;• Mittal Steel’s system of internal controlregarding finance, accounting, legalcompliance and ethics that the Boardof Directors and members ofmanagement have established; and• Mittal Steel’s auditing, accounting andfinancial reporting processes generally.The Audit Committee’s primary duties andresponsibilities are to:• serve as an independent and objectiveparty to monitor Mittal Steel’s financialreporting process and internal controlssystem;• review and appraise the audit efforts ofMittal Steel’s independent accountantsand internal auditing department;• provide an open avenue ofcommunication among the independentaccountants, financial and seniormanagement, the internal auditingdepartment and the Board of Directors;• approve the appointment and fees of theindependent auditors; and• monitor the independence of theexternal auditors.The current members of the AuditCommittee are: Messrs. Narayanan Vaghul,José Rámon Álvarez-Rendueles, Wilbur L.Ross and Edmond Pachura, all of whom areindependent under Mittal Steel’s CorporateGovernance guidelines, the NYSE standardsand the Dutch Corporate Governance Code.The Chairman of the Audit Committee isMr. Vaghul, who has significant experienceand financial expertise. Mr. Vaghul is theChairman of ICICI Bank, a company that islisted on the NYSE and the Mumbai StockExchange. Mr. Álvarez-Rendueles, as formerGovernor of the Bank of España and formerPresident of the Bank Zaragozano, alsohas significant experience and financialexpertise. Both Mr. Ross and Mr. Pachurahave considerable experience in managingcompanies’ affairs.The charter of the Audit Committee isavailable at http://www.mittalsteel.com/Investor+Relations/Corporate+Governance.The Audit Committee is required to meetat least four times a year. During 2006,the Audit Committee met nine times,five of which were physical meetingsand four of which were meetings heldby teleconference.Appointments, Remuneration andCorporate Governance CommitteeUntil 30 October 2006, the Board ofDirectors had a Nomination Committeeand a Remuneration Committee. As of30 October 2006, these two committeeshave been replaced by the Appointments,Remuneration and Corporate GovernanceCommittee.The Appointments, Remuneration andCorporate Governance Committee iscomprised of four directors, all of whom areindependent, as were all directors in thetwo predecessor committees. The membersare appointed by the Board of Directors.The Appointments, Remuneration andCorporate Governance Committee makesdecisions by a simple majority with nomember having a casting vote.The Board of Directors has established theAppointments, Remuneration and CorporateGovernance Committee to:• determine on its behalf and on behalfof the shareholders within agreed termsof reference Mittal Steel’s frameworkof remuneration and compensation,including stock options for theChief Executive Officer and the ChiefFinancial Officer of Mittal Steel, themembers of the Group ManagementBoard and the members of theManagement Committee;• consider any appointment orreappointment to the Board of Directorsat the request of the Board of Directors;• provide advice and recommendationsto the Board of Directors on suchappointment; and• develop, monitor and review corporategovernance principles applicable toMittal Steel.The Appointments, Remuneration andCorporate Governance Committee’sprincipal responsibility in compensatingexecutives is to encourage and rewardperformance that will lead to long-termenhancement of shareholder value.The Appointments, Remuneration andCorporate Governance Committee will,at the request of the Board of Directors,consider any appointment or reappointmentto the Board of Directors. It will provideadvice and recommendations to the Boardof Directors on such appointment. TheAppointments, Remuneration and CorporateGovernance Committee is also responsiblefor developing, monitoring and reviewingCorporate Governance principles applicableto Mittal Steel.The current members of the Appointments,Remuneration and Corporate GovernanceCommittee are: Messrs. Joseph Kinsch,Sergio Silva de Freitas, Lewis Kadenand Jean-Pierre Hansen, all of whom areindependent under Mittal Steel’s CorporateGovernance guidelines, the NYSE standardsas well as the Dutch Corporate GovernanceCode. The Chairman of the Appointments,Remuneration and Corporate GovernanceCommittee is Mr. Kaden.The charter of the Appointments,Remuneration and CorporateGovernance Committee is availableat http:/ /www.mittalsteel.comInvestor+Relations/Corporate+Governance.

Arcelor Mittal Activity Report 2006 85The Appointments, Remuneration andCorporate Governance Committeeis required to meet at least twice a year.Its two predecessors, the Mittal SteelNomination Committee and the MittalSteel Remuneration Committee,were also required to meet twicea year. During 2006, each of these threecommittees met three times.Governance Following the Initial TermThe Memorandum of Understandingprovides that upon expiration of the InitialTerm, the parties to the MOU will reviewArcelor Mittal’s corporate governance rulesdescribed above in order to reflect thebest standards of corporate governance forcomparable companies and, in particular,have them conform with the corporategovernance aspects of the NYSE listingstandards applied to non-US companiesand the applicable Luxembourg corporategovernance code or similar document.The Chairman and the President shall consultin the year prior to the end of the Initial Termwith a view to determining the identity of thedirectors that could be recommended to theAppointments, Remuneration and CorporateGovernance Committee.Dutch and US Corporate GovernanceIn June 2001, Mittal Steel adoptedcorporate governance guidelines in line withbest practices on corporate governance.Mittal Steel has since continued tomonitor diligently new, proposed andfinal US and Dutch corporate regulatoryrequirements, and it will make adjustmentsto its corporate governance controls andprocedures to stay in compliance withthese requirements on a timely basis.Mittal Steel is committed to meeting thecorporate governance and requirementsunder applicable current and proposedSEC and New York Stock Exchange listingstandards and the laws of The Netherlands.The Dutch Corporate Governance Codewas published on 9 December 2003.During the Mittal Steel Annual GeneralMeeting of Shareholders held on 5 May2004, the implications of the DutchCorporate Governance Code werediscussed with its shareholders andcertain proposed changes to Mittal Steel’sArticles of Association to bring themin line with the requirements of theDutch Corporate Governance Code wereapproved by the shareholders.Finally, Mittal Steel’s General Meetingof Shareholders, in which the SignificantShareholder can determine the outcomeof votes, also approved one deviation fromthe Dutch Corporate Governance Code,i.e., the separation of the posts ofChairman and Chief Executive Officer, as itapproved that Mr. Lakshmi N. Mittal couldremain Mittal Steel’s Chairman and ChiefExecutive Officer. Because this deviationwas approved by the General Meeting ofShareholders, Mittal Steel is in compliancewith the Dutch Corporate Governance Codeand the relevant provisions of Book2 of the Dutch Civil Code.At the Mittal Steel Annual General Meetingof Shareholders held on 26 May 2005,the shareholders approved an amendmentto Mittal Steel’s Articles of Associationstipulating a clear division of responsibilityfor setting a remuneration policy for theBoard of Directors and individual membersof the Board of Directors between theBoard of Directors, the RemunerationCommittee (since then replaced by theAppointments, Remuneration and CorporateGovernance Committee, as describedabove) and shareholders. In addition,the Mittal Steel Articles of Association wereupdated to reflect changes in Dutch law.Each year the Board of Directors willsubmit for approval by the General Meetingof Shareholders a proposal regardingthe arrangements for the remunerationin the form of shares or rights to acquireshares. The proposal will at least set outthe maximum number of shares or rightsto subscribe for shares to be granted tothe members of the Board of Directorsand the applicable criteria for such grantor for any change thereto. A lack ofapproval by the general meetingof shareholders of such proposal will notaffect the representative authority of theBoard of Directors in connection withthe grant of rights to subscribe for shares.In accordance with the Dutch CorporateGovernance Code, non-executive membersof the Board of Directors will not receiveany share options, and no options havebeen awarded after 2002.Finally, on 30 June 2006, the GeneralMeeting of Shareholders of Mittal Steelresolved to amend Mittal Steel’s Articlesof Association to eliminate all differencesbetween the rights attached to MittalSteel’s class A common shares and classB common shares (except for the rightof the holders of the class B commonshares to convert their class B commonshares on a share-per-share basis intoclass A common shares). Following theimplementation of the amendment,which took effect on 7 September 2006,all shareholders hold shares carryingthe same voting and economic rights;each share one vote, irrespective of thetime it has been held. As a result ofthe amendment, the holders of class Bcommon shares no longer have the rightto make a binding nomination for theappointment of directors to the Boardof Directors. All directors are electedby the General Meeting of Shareholdersto serve three-year terms by a simplemajority of the votes cast.Process for Handling Complaintsabout Accounting MattersAs part of the procedures of theBoard of Directors for handlingcomplaints or concerns about MittalSteel’s financial accounting, internalcontrols and auditing issues, MittalSteel’s Code of Business Conductencourages all employees to bring suchissues to the Audit Committee’s attention.Concerns relating to such issuesmay be communicated through theMittal Steel website at http://www.mittalsteel.com/dynamic/dynamicdefault.asp?id=questionable.During 2006, employees reportedno complaints of this nature.Internal AssuranceMittal Steel has an Internal Assurancefunction. Until 19 December 2006,the function was solely the responsibilityof the Director Internal Assurance,who reported to the Audit Committee.Since 19 December 2006, theDirector-Internal Assurance of Mittal Steelwas made jointly responsible for thefunction along with the Head of InternalAudit at Arcelor. The function is staffedby full time professional staff locatedat each of the principal operatingsubsidiaries and at the corporate level.Recommendations and matters relatingto internal control and processes aremade by the Internal Assurance function,and their implementation is regularlyreviewed by the Audit Committee.Independent recognised publicaccounting firm IndependenceThe appointment and determinationof fees of the independent recognisedpublic accounting firm is the directresponsibility of the Audit Committee.The Audit Committee is further responsiblefor obtaining annually a written statementfrom the independent recognisedpublic accounting firms that theirindependence has not been impaired.The Audit Committee has also obtaineda confirmation from the principalindependent recognised public accountingfirm that none of its former employeesis in a position with Mittal Steel that mayimpair the principal independent recognisedpublic accounting firm’s independence.Ethics and Conflict of InterestEthics and conflicts of interest are governedby Mittal Steel’s Code of Business Conduct.The Code of Business Conduct sets outstandards for ethical behavior that are tobe followed by all employees and directorsof Mittal Steel in the discharge of theirduties. They must always act in thebest interests of Mittal Steel and mustavoid any situation in which their personalinterests conflict, or could conflict,with their obligations to Mittal Steel.As employees, they must not acquire anyfinancial or other interest in any businessor participate in any activity that coulddeprive Mittal Steel of the time orthe attention needed to devote to theperformance their duties. Any behaviourthat deviates from the Code of BusinessConduct is to be reported to the employee’ssupervisor, a member of the management,the head of the legal departmentor the head of the internal audit/internalassurance department. The Codeof Business Conduct is available at http://www.mittalsteel.com/Investor+Relations/Corporate+Governance.

86 Arcelor Mittal Activity Report 2006Corporate GovernancecontinuedD. EmployeesMittal Steel had approximately 320,000 employees as of 31 December 2006.The table below sets forth the total number of employees by operating segment for the past three years:As of 31 DecemberSegment 2004 2005 2006Flat Carbon Americas 1 8,453 21,046 36,700Flat Carbon Europe 31,619 29,811 67,238Long Carbon Americas and Europe 19,285 20,050 40,893AACIS 104,945 153,235 148,291Stainless Steel 2 - - 11,542AM3S - - 11,560Consolidated 3 164,393 224,286 319,5781Includes Dofasco for Arcelor in 2006.2The Stainless Steel and AM3S segmentscorrespond solely to the operations of Arcelorwhich was acquired 1 August 2006.3Includes corporate and other employees.

Arcelor Mittal Activity Report 2006 87E. Share OwnershipAs of 31 December 2006, the aggregatebeneficial share ownership of MittalSteel directors and senior management(42 individuals) was 2,864,798 MittalSteel class A common shares (excludingshares owned by Mittal Steel’s Significantshareholder and including options toacquire 438,901 Mittal Steel classA common shares that are exercisablewithin 60 days of December 31, 2006),being 0.21% of the total issued sharecapital of Mittal Steel. Excluding optionsto acquire Mittal Steel class A commonshares, these 42 individuals beneficiallyown 2,425,897 Mittal Steel class Acommon shares. Other than the Significantshareholder, one director and no memberof senior management beneficially ownsmore then 1% of the Mittal Steel commonshares. The percentageof total common shares in thepossession of the Significant shareholder(including the treasury stock) hasdecreased from 87.47% prior to 1 August2006 to 44.79% after that dateas a result of the aquisition of Arcelor.The number of Mittal Steel options grantedto directors and senior management(including the Significant shareholder)in 2005 was 520,566 at an exerciseprice of US$28.75 and the numberof Mittal Steel options granted to directorsand senior management (includingthe Significant shareholder) in 2006was 550,300 at an exercise price ofUS$33.755. No options were grantedduring 2003 and 2004. These optionsvest either ratably upon each of the firstthree anniversaries of the grant date,or, in total, upon the death, disabilityor retirement of the participant. The optionterm expires 10 years after the grant date.In 2006, Arcelor granted 375,000options to its senior management atan exercise price of €34.43.The following table provides summarisedinformation on the options outstandingand the movements on the optionsgranted to Mittal Steel’s seniormanagement (in 2001, 2003 and 2004,no options were granted to members ofMittal Steel’s senior management):Options* Options* Options* Options* Options* Average weighted1999 granted 2000 granted 2002 granted 2005 granted 2006 granted Total exercise priceSenior Managers 156,000 167,500 245,000 520,566 550,300 1,639,366 22.81(including Significant Shareholder)Exercise price (USD) 11.94 8.57 2.26 28.75 33.76 — —Term (in years) 10 10 10 10 10 — —Expiration date 14 September 2009 1 June 2010 5 April 2012 23 August 2015 1 September 2016 — —In accordance with the Dutch Corporate Governance Code, independent non-executive members of Mittal Steel’s Board of Directors willno longer receive any share options.* Options awarded under MittalShares.

88 Arcelor Mittal Activity Report 2006Market InformationWith a free float of 55.2%, a market capitalisation of morethan US$70 billion and a presence in major indexes(CAC40, AEX…), Arcelor Mittal has the ambition to developand balance its shareholder base on the major listedmarkets, and attract new investors.By implementing high standards of financialinformation disclosure, and providing clear,regular, transparent and even-handedinformation to all its shareholders, ArcelorMittal aims to be the first choice forinvestors of the sector.To meet this objective and provide adequateinformation to the needs of all parties,Arcelor Mittal has decided to implement anactive and broad communications policy:roadshows with the financial community,conference calls, plant visits, meetings withretail and private investors, and a websitefeaturing management comments onquarterly and full-year results.Arcelor Mittal’s top Management intendsto meet private investors and shareholderassociations in fairs. A dedicated toll freenumber for private investors is availableat 00800 4792 4792. Request can alsobe sent by email at PrivateInvestors@arcelomittal.com.As the world’s leading steel company andmajor investment vehicle in the steel sector,Arcelor Mittal constantly seeks to developrelationships with financial analysts andinternational investors. Depending on theirgeographical location, investors can use thefollowing e-mails:InstitutionalsAmericas@arcelormittal.comInstitutionalsEurope@arcelormittal.comInstitutionalsUKAsiaAfrica@arcelormittal.comSocially Responsible InvestmentThe Investor Relations are also a privilegedinterlocutor for the growing SociallyResponsible Investment community.The team organises special events onArcelor Mittal’s sustainable developmentstrategy and answers the many requestsof information sent to the Group(e-mail: SRI@arcelormittal.com).Credit and Fixed Income InvestorsCredit, Fixed Income Investors and ratingagency are followed by a dedicatedteam of Investor Relations (e-mail:CreditFixedIncome@arcelormittal.com).Financial CalendarFinancial Results21st February 2007Results for 4th quarter 2006and 12 months 200616th May 2007Results for 1st quarter 20071st August 2007Results for 2nd quarter 2007and 6 months 200714th November 2007Results for 3rd quarter 2007and 9 months 2007Dividend payment15th March 20071st quarterly payment of base dividend15th June 20072nd quarterly payment of base dividend17th September 20073rd quarterly payment of base dividend17th December 20074th quarterly payment of base dividendTo subscribe to Arcelor Mittal releases andresults, please visit the subscription page inthe press section of www.arcelormittal.com.

Financial Results21st February 2007Results for 4th quarter 2006and 12 months 200616th May 2007Results for 1st quarter 20071st August 2007Results for 2nd quarter 2007and 6 months 200714th November 2007Results for 3rd quarter 2007and 9 months 2007Arcelor Mittal Activity Report 2006 89

90 Arcelor Mittal Activity Report 2006Key Operating SubsidiariesSubsidiary (full legal name) Registered Office Percentage ownershipFlat Carbon AmericasCompanhia Siderúrgica de Tubarão S.A. Av. Brigadeiro Eduardo Gomes, 930, Jardim Limoeiro, 29163-970 Serra 67.41%Espirito Santo, BrazilDofasco Inc. 1330 Burlington Street East, L8N 3J5 Hamilton, Ontario, Canada 100%Mittal Steel Lázaro Cárdenas S.A. de C.V. Fco. J. Mujica No. 1-B, Apartado Postal No. 19-A, C.P. 60950 100%Cd. Lázaro Cárdenas, Michoacan, MexicoMittal Steel USA Inc. 1 South Dearborn, Chicago, IL 60603, USA 100%Flat Carbon EuropeAceria Compacta de Bizkaia, S.A. 6, Chavarri, 48910 Sestao, Vizcaya, Spain 99.72%Arcelor Atlantique et Lorraine SAS 1 à 5, rue Luigi Cherubini, 93200 St Denis, France 100%Arcelor Bremen GmbH Auf Den Delben 35, D-28237 Bremen, Germany 99.88%Arcelor Eisenhüttenstadt GmbH Werkstr. 1, D-15890 Eisenhüttenstadt, Brandenburg, Germany 100%Arcelor España S.A. Residencia La Granda, 33418 Gozon, Asturias, Spain 99.72%Arcelor Méditerranée SAS 1 à 5, rue Luigi Cherubini, 93200 St Denis, France 100%Arcelor Steel Belgium N.V. Avenue de l’Yser, 24, 1040 Brussels, Belgium 99.82%Arcelor Piombino S.p.a. Via S.Egidio nr.16, 50123 Firenze, Italy 99.79%Cockerill Sambre S.A. Rue Trasenster, 21, 4102 Seraing, Belgium 100%Industeel Belgium S.A. Rue de Châtelet, 266, 6030 Charleroi, Belgium 100%Industeel France S.A. 1 à 5, rue Luigi Cherubini, 93200 St Denis, France 100%Mittal Steel Galati S.A. Strada Smardan nr. 1, Galati, Romania 99.65%Mittal Steel Ostrava a.s. Vratimovska 689, 707 02 Ostrava-Kunčice, Czech Republic 84.47% 1Mittal Steel Poland S.A. Ul. Chorzowska 50, 40-121 Katowice, Poland 99.48% 1Long Carbon Americas and EuropeAcindar Industria Argentina de Aceros S.A. 2739, Estanislao Zeballos, B1643 AGY Buenos Aires, Argentina 44.38% 3Arcelor Bergara, S.A. 6, C/Ibarra, 20570 Bergara, Spain 99.72%Arcelor Huta Warszawa Sp.z.o.o. UL.Kasprowicza 132, 01-949 Warszawa, Poland 100%Arcelor Madrid, S.L. Ctra. De Toledo KM 9,200, 28021 Madrid, Spain 99.72%Arcelor Olaberría, S.L. Carretera Nacional Madrid – Irun S/N, 20212 Olaberría, Spain 99.72%Arcelor Profil Luxembourg S.A. 66, rue de Luxembourg, 4221 Esch sur Alzette, Luxembourg 99.82%Arcelor Rodange S.A. 1, rue de l’Industrie, BP 24, 4801 Rodange, Luxembourg 79.70%Belgo Siderurgia S.A. 1115, avenida Carandai, 24° Andar, 30130-915 Belo Horizonte- MG, Brazil 67.41%Mittal Canada Inc. 4000, route des Aciéries, Contrecoeur, Québec J0L 1C0, Canada 100%Mittal Steel Hamburg GmbH Dradenaustrasse 33, D-21129 Hamburg, Germany 100%Mittal Steel Hochfeld GmbH 2 Wörthstrasse 125, D-47053 Duisburg, Germany 100%Mittal Steel Ostrava a.s. Vratimovska 689, 707 02 Ostrava-Kunčice, Czech Republic 84.47% 1Mittal Steel Point Lisas Ltd. Mediterranean Drive, Point Lisas, Couva, Trinidad and Tobago 100%Mittal Steel Poland S.A. Ul. Chorzowska 50, 40-121 Katowice, Poland 99.48% 1Mittal Steel Ruhrort GmbH 2 Vohwinkelstrasse 107, D-47137 Duisburg, Germany 100%Mittal Steel USA Inc. 1 South Dearborn, Chicago, IL 60603, USA 100%

Arcelor Mittal Activity Report 2006 91Subsidiary (full legal name) Registered Office Percentage ownershipAACISMittal Steel Annaba Spa Sidi Amar, El-Hadjar Complex, B.P. 2055 Annaba 23000, Algeria 70%OJSC Mittal Steel Kryviy Rih 1 Ordzhonikidze Street, Kryviy Rih, 50095 Dnepropetrovsk Oblast, Ukraine 93.77%Mittal Steel Liberia Limited 401, Ocean View Apartments, UN Drive, Monrovia, Liberia 70%Mittal Steel South Africa Ltd. Main Building, Room N3/5, Delfos Boulevard, Vanderbijlpark, 1911, South Africa 52%JSC Mittal Steel Temirtau Republic Ave., 1, 101407 Temirtau, Karaganda Region, Republic of Kazakhstan 100%Société Nationale de Sidérurgie, S.A. Route Nationale n° 2, Km 18, BP 551, Al Aarroui, Morocco 32.34% 4Stainless SteelAcesita S.A. Avenida Joao Pinheiro, 580, Centro, 30130-180 Belo Horizonte, Minas Gerais, Brazil 57.32%Ugine & Alz Belgium N.V. Avenue de l’Yser, 24, 1040 Brussels, Belgium 99.82%Ugine & Alz France S.A. 1 à 5, rue Luigi Cherubini, 93200 St Denis, France 100%AM3SArcelor Auto Processing France SAS Route de Saint Leu d’Esserent, 60160 Montataire, France 100%Arcelor Construction France S.A. Immeuble Hermès, 20, rue Jacques Daguerre, 92500 Rueil Malmaison, France 100%Arcelor International America, LLC 350 Hudson Street, 4th floor, New York, New York 10014, USA 100%Produits d’Usines MétallurgiquesPum-Station Service Acier S.A. 1 & 3, place Max Rousseaux, 51076 Reims Cedex, France 100%Ravené Schäfer GmbH Gutenbergstrasse 11, D-33790 Halle, Germany 100%1Represents the percentage of shares to whichMittal Steel has title or that are subject to anexecuted agreement providing for their transfer toMittal Steel at a fixed price and future date.2Mittal Steel Ruhrort and Mittal Steel Hochfeld aretogether referred to as Mittal Steel Duisburg.3Acindar Industria Argentina de Aceros S.A.is controlled by Arcelor Brazil, a subsidiaryof Mittal Steel.4Société Nationale de Sidérurgie, S.A.is controlled by Nouvelles Sidérurgies Industrielles,a subsidiary of Mittal Steel.

92 Arcelor Mittal Activity Report 2006Research and DevelopmentArcelor Mittal now operates 13 major research centres inEurope, the US and Canada. Between them, they employ morethan 1,200 researchers. They were responsible for a recordnumber of new product launches in 2006.


94 Arcelor Mittal Activity Report 2006Arcelor Mittal Pro Forma Consolidated Statements (unaudited)Consolidated Statements of Income(Based on IFRS, in millions of US dollars, except shares, per share, employee and shipment data)Year EndedYear EndedIn USD million December 31, 2006 December 31, 2005PRO FORMA STATEMENTS OF INCOME DATASales 88,576 80,171Depreciation 3,448 3,311Operating Income 11,824 11,648Operating Margin % 13.3 % 14.5 %Other income (expense) - net 50 329Income from equity method investments 569 429Financing costs - net (1,328) (1,257)Income before taxes and minority interest 11,115 11,149Income tax expense 1,654 1,403Income before minority interest 9,461 9,746Minority interest (1,488) (1,483)Net income 7,973 8,263Basic earnings per common share 5.76 5.97Diluted earnings per common share 5.76 5.97Weighted average common shares outstanding (in millions) 1 1,383 1,383Diluted weighted average common shares outstanding (in millions) 1,385 1,385EBITDA 2 15,272 14,959EBITDA Margin % 17.2 % 18.7 %OTHER INFORMATIONTotal shipments of steel products 3 (millions of metric tonnes) 110.5 102.9Employees (000’s) 319 3341The information provided assumes that shares issued in connection with the acquisition of Arcelor were issued at the beginning of the period presented.2EBITDA defined as operating income plus depreciation.3Some intercompany shipments are not eliminated.

Arcelor Mittal Activity Report 2006 95Arcelor Mittal Pro Forma Consolidated Statements (unaudited)Consolidated Statements of Cash Flows(Based on IFRS, in millions of US dollars, except shares, per share, employee and shipment data)Year EndedIn USD million December 31, 2006Net cash provided by operating activities 10,285Investing activities:Purchase of property, plant and equipment (4,638)Other investing activities (net) (137)Net cash used in investing activities (4,775)Financing activities:Proceeds (payments) from payable to banks and long-term debt (718)Dividends paid (2,480)Other financing activities (net) (88)Net cash used in financing activities (3,286)Effect of exchange rate changes on cash 295Change in cash and cash equivalents 2,519

96 Arcelor Mittal Activity Report 2006Arcelor Mittal Pro Forma Consolidated Statements (unaudited)Key Financial and Operational Information(Based on IFRS, in millions of US dollars, unless otherwise stated)Flat Carbon Flat Carbon Long Carbon AACIS Stainless AM3SAmericas Europe Americas SteelIn USD billionand EuropeFINANCIAL INFORMATIONSales 21.9 27.6 18.5 14.7 7.3 11.9Depreciation 1.0 1.0 0.6 0.5 0.2 0.1Operating income 2.6 2.8 3.0 2.6 0.7 0.5Operating margin (as a percentage of sales) 11.9 % 10.2 % 16.1 % 17.9 % 10.1 % 3.9 %EBITDA 3.6 3.9 3.6 3.1 0.9 0.6EBITDA margin (as a percentage of sales) 16.4 % 14.0 % 19.2 % 21.0 % 12.9 % 4.7 %OPERATIONAL INFORMATIONCrude Steel Production (millions of metric tonnes) 31.5 38.5 24.6 20.8 2.6 -Steel Shipments (millions of metric tonnes) 30.0 33.1 24.9 20.3 2.2 14.3Employees (000’s) 36.7 67.2 41.0 102.2 11.5 11.6– EBITDA is operating income plus depreciation.– Crude steel production is a combination of crude steel at the former Arcelor units and liquid steel at former Mittal Steel units.– Some inter segment and intra segment sales have not been eliminated.– Some intercompany shipments are not eliminated.– AM3S shipments are not consolidated.– Presented on the same basis as in our Annual Report.


98 Arcelor Mittal Activity Report 2006Mittal Steel N.V. Consolidated Financial and Other InformationConsolidated Balance Sheets(Based on IFRS, in millions of US dollars, except shares, per share, employee and shipment data)As ofAs ofIn USD million December 31, 2006 December 31, 2005ASSETSCurrent AssetsCash and cash equivalents 6,020 2,035Restricted cash 120 100Short-term investments 6 14Trade accounts receivable – net 8,769 2,287Inventories 19,238 5,994Prepaid expenses and other current assets (including assets held for sale) 5,209 925Total Current Assets 39,362 11,355Goodwill and intangible assets 10,782 1,806Property, plant and equipment 54,696 19,045Investments accounted for using the equity method 3,492 947Other investments 1,151 277Deferred tax assets 1,670 318Other assets 1,013 119Total Assets 112,166 33,867LIABILITIES AND EQUITYCurrent LiabilitiesPayable to banks and current portion of long-term debt 4,922 334Trade accounts payable 10,717 2,504Accrued expenses and other current liabilities 8,921 2,761Total Current Liabilities 24,560 5,599Long-term debt, net of current portion 21,645 7,974Deferred tax liabilities 7,274 2,174Other long-term obligations and deferred employee benefits 8,496 2,663Total Liabilities 61,975 18,410Shareholders’ Equity 42,127 13,286Minority Interest 8,064 2,171Total Equity 50,191 15,457Total Liabilities and Equity 112,166 33,867

Arcelor Mittal Activity Report 2006 99Mittal Steel N.V. Consolidated Financial and Other InformationConsolidated Statements of Income Data & Other Information(Based on IFRS, in millions of US dollars, except shares, per share, employee and shipment data)Year Ended Year EndedIn USD million December 31, 2006 December 31, 2005STATEMENT OF INCOMESales 58,870 28,132Depreciation 2,296 1,113Operating income 7,499 4,729Other income (expense) – net 49 214Income from equity method investments 301 86Financing costs – net (654) (353)Income before taxes and minority interest 7,195 4,676Income tax expense 1,109 881Income before minority interest 6,086 3,795Minority interest (860) (494)Net income attributable to equity holders of the parent 5,226 3,301Basic earnings per common share 5.29 4.80Diluted earnings per common share 5.28 4.79Weighted average common shares outstanding (in millions) 988 687Diluted weighted average common shares outstanding (in millions) 989 689OTHER INFORMATIONTotal shipments of steel products 1 (millions of metric tonnes) 78.1 44.61Some intercompany shipments are not eliminated.

100 Arcelor Mittal Activity Report 2006Mittal Steel N.V. Consolidated Financial and Other InformationConsolidated Statements of Cash Flows(Based on IFRS, in millions of US dollars, except shares, per share, employee and shipment data)Year EndedDecember 31, December 31,In USD million 2006 2005Operating activities:Net cash provided by operating activities 7,122 3,874Investing activities:Purchase of property, plant and equipment (2,935) (1,181)Acquisition of net assets of subsidiaries, net of cash acquired (5,842) (6,120)Other investing activities (net) 201 (211)Net cash used in investing activities (8,576) (7,512)Financing activities:Proceeds from payable to banks and long-term debt 6,143 5,449Dividends paid (660) (2,092)Other financing activities (net) (38) (8)Net cash provided by (used in) financing activities 5,445 3,349Effect of exchange rate changes on cash (6) (171)Net increase in cash and cash equivalents 3,985 (460)Cash and cash equivalents:At the beginning of the year 2,035 2,495At the end of the year 6,020 2,035

Arcelor Mittal Activity Report 2006 101Mittal Steel N.V. Consolidated Financial and Other InformationAuditors’ ReportTo the shareholders of Mittal Steel Company N.V.AUDITORS’ REPORTIntroductionWe have audited whether the Consolidated Balance Sheets, Consolidated Statements of Income Data and Other Informationand Consolidated Statements of Cash Flows of Mittal Steel Company N.V., Rotterdam, as presented on pages 98 to 100 of the Arcelor MittalActivity Report 2006, have been derived consistently from the audited financial statements of Mittal Steel Company N.V., for the year 2006.In our auditors’ report dated 16 April 2007 we expressed an unqualified opinion on these financial statements.Management is responsible for the preparation of the Consolidated Balance Sheets, Consolidated Statements of Income Dataand Other Information and Consolidated Statements of Cash Flows in accordance with the accounting policies as applied in the 2006financial statements of Mittal Steel Company N.V.Our responsibility is to express an opinion on these Consolidated Balance Sheets, Consolidated Statements of Income Dataand Other Information and Consolidated Statements of Cash Flows.ScopeWe conducted our audit in accordance with Dutch law. This law requires that we plan and perform the audit to obtain reasonableassurance that the Consolidated Balance Sheets, Consolidated Statements of Income Data and Other Information and ConsolidatedStatements of Cash Flows have been derived consistently from the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, these Consolidated Balance Sheets, Consolidated Statements of Income Data and Other Information and ConsolidatedStatements of Cash Flows have been derived consistently, in all material aspects, from the financial statements.Emphasis of matterFor a better understanding of the company’s financial position and results and the scope of our audit, we emphasise thatthe Consolidated Balance Sheets, Consolidated Statements of Income Data and Other Information and Consolidated Statementsof Cash Flows should be read in conjunction with the unabridged financial statements, from which the Consolidated BalanceSheets, Consolidated Statements of Income Data and Other Information and Consolidated Statements of Cash Flows were derivedand our unqualified auditors’ report thereon dated 16 April 2007. Our opinion is not qualified in respect of this matter.Deloitte Accountants B.V.E.R. Termaten RARotterdam, The Netherlands30 April 2007

102 Arcelor Mittal Activity Report 2006Notes

NotesArcelor Mittal Activity Report 2006 103

104 Arcelor Mittal Activity Report 2006Notes

Pictures featured in pages 4 - 24 (except 14-15)taken by Wolfgang von Brauchitsch (Germany).Designed and produced by www.thoburns.com (United Kingdom).Printed by Royle Corporate Print (United Kingdom).The paper and board used for this Report is manufacturedfrom wood pulp sourced from sustainable forests. It is manufacturedusing Elemental Chlorine Free (ECF) pulp. The printer has ISO 14001accreditation and is Carbon Neutral certified.This document is also available in French and Spanish.Published in May 2007. To receive a copyof the Activity Report, please contact:Arcelor Mittal19, Avenue de la LibertéL-2930 LuxembourgT: +352 4792 2360www.arcelormittal.comCopyright 2007 Arcelor Mittal

Arcelor Mittal19, Avenue de la LibertéL-2930 LuxembourgBerkeley Square HouseBerkeley SquareLondon W1J 6DAwww.arcelormittal.com

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