Retail Shareholders Annual Event for ArcelorMittal. It's a pleasure to be with in a virtual sense rather than a real sense this year because of the COVID-nineteen virus with Michel Wirth, a member of the main Board of Assimil and we also have Hecho Patel from Investor Relations, who is ready to answer to take in any questions that you could. And you may questions via the Q and A device on your screen at the bottom of the Zoom window. Michel, welcome. Very nice to see you.
So you're looking well. I hope we're all well. But obviously, we are living through the worst pandemic in 101 years 102 years. It's caused the greatest economic damage, I guess, since the 2nd World War to the global economy. But I think, in fact, Arsene Mittel has had pretty good results.
But let's leave that aside for the moment. I mean, the company has, what, 191,000 employees. You're in 16, 18 countries, customers in all over the world, 160 countries. How have you coped as a company
with your employees during this period? So thank you for your warm welcome, John. And I would also like to welcome all our participants to this conference. These are our dear shareholders. So it's all the time.
It really is a pleasure to have the occasion to speak to them. And first of all, I would like to think on them. And I think and I hope also that all of them are very safe and healthy and did not suffer from this terrible pandemic, which is absolutely key and which has indeed, to come back to your question, the it's the middle of our policy and of our efforts when it appeared in first in mainly in March in our main plants and in our main offices. And what we say is and as we say it all the time for safety, we say it also for health. And we say this is our first priority so that to help our people to come out.
And I would say at the beginning of the pandemics, in many of the plants, we had even to make shutdowns, but it was also necessary from our customer point of view. So the world at one time stopped. And for example, to give you simply one example for our European automotive clients in at the end of the Q1, beginning of April, demand within 3 weeks went down by 70%. So all the books vanished. And so what we told to our people was safety first.
We were immediately introducing our sanitary protocols. We were providing masks. We were providing we were imagining processes how to behave. And in general, we can say that things happened quite well. And when we look today at our statistics, we see that our people in our plants didn't get infected by the virus.
And as I see all the time for safety, it is safer to work in our plants than to drive your car. I can also tell it was safer to work in our plants in COVID periods than being outside our plants. And fortunately, it happened quite a lot with sometimes difficult different situations from one country to the other. But it was also in some countries you get better support than in others. So first was health and safety.
And then we needed to adapt to the situation in terms of cost, in terms of production. And as you know, as Lamittal, when there is a big turmoil coming, we are reacting very fast and very efficiently. And it was like that this time as well.
And did the reaction of the workforce vary from country to country? I mean, I'm thinking you've got some activity in China, but you also, of course, have a joint venture with Calvert Nippon Steel in the United States, Calvert. And my recollection of the news is that a lot of Americans are much more reluctant to recognize the virus and also wear masks and, for example, in France or Luxembourg or Germany or wherever.
Yes. But I would say that our people working in the steel industry are disciplined people because we need to have a disciplined way how to proceed. And from that point of view, I think it worked quite well. We had a little bit more difficulties in Mexico, for example. We were also suffering in Brazil because in Brazil, you know, as in the United States, that policy was not so much emphasized on taking care of the situation.
But in general, it worked quite well.
We can't take it from that, Vishal.
No, but I see that we are global citizens, and we need to adapt. And we have to take the political environment. We cannot change it and then try to do our best for the best of our different stakeholders and also our employees. And from a production point of view, what happened, we tried immediately to take care to manage our fixed costs in the best possible way, to discuss with our stakeholders, to take advantage of part time unemployment schemes, which are government supported in the different jurisdictions. We had to adapt production.
And in many of the production units in Q2, we had a drop of production of 25%, 20%, 30%, which was absolutely huge. But it was necessary because otherwise, you would build up inventory. You would have to spend a lot of money. And you are not sure that after the pandemic ended that you are able to sell the product. So you need to be extremely reactive.
And I would say that was very, very successful. And you mentioned before that we had good results. I would say we had decent results, but it was also same to the reactivity of our people and also of our senior management.
I mean, thinking back to the Q3 results, I mean, they do look pretty good despite the economic collapse of much of the world. I mean, how do you explain it? But I say how do
we explain it? But basically, it explained it by because we took the right reactions. And in fact, as from Q2 on, we were successful to almost what we call internally to variableize our fixed costs. That would mean that this production is down 25%. We were successful in reducing fixed cost by 25% in the same quarter.
And in the Q3, that was in the second quarter was roughly 25%. And in the Q3, what we did there, we got some upswing in the market. We could take advantage of it. So we were reactive in production, but also we kept our fixed cost under control. And the consequence of that was that the results were much more decent.
And what we saw also in Q3 was that the recovery was much more in the reform differently from the crisis of 2,008, where we had much more kind of crisis because the crisis was much going much down. And now as we presently speaking, we are seeing the 2nd wave. But I can say fortunately, the 2nd wave is, I would say, not as strong in the steel industry sector also with our customers than it has been in, for example, in some service industries, B2C, like hotel, restaurants, retail shops and so on, which are even today in a much worse situation than we have been.
But presumably, the key to the next year will be the vaccine. Assuming that vaccines work, that they're adopted, then what does the future look like for Raso Mittal?
Well, I think that would then be the good news. And so we are supporting and maybe that I can even tell the people that Mr. Mittel himself privately made a big donation for the Oxford University developed vaccine because he saw the negative points of the COVID. And so he took some of personal wealth in order to try to accelerate the movement. But that is only, I think, a side remark.
It is clear that once the vaccine is coming, it will help normalizing the world. The world will be different tomorrow. So also in terms of consumption pattern, that is absolutely sure. But I think what will be helpful is that during this pandemic, saving rates increased a lot. And this is what we can hope after the and after once the vaccine would be there that people would maybe invest a little bit more in consumer durables and consumer durables, I would say, are more steam intensive than other consumer goods.
And so this should be good. And that's the reason also why in general, we hope that after the sharp drop in production this year, we can have an increasing drop, which we're not fully compensating what we have lost this year. But we should definitely hope to be in a better shape next year. And we see it already also now because we foresee that after the rebound of Q3, we will have a rebound in Q4. So we will produce more in Q4 than we have produced in Q3, and we hope that this movement can continue in 2021.
And presumably, the biggest factor
to help you would be a recovery of the automobile market.
Automotive is extremely important. And that is also Q3 and Q4 is have really been pushed by the increase in automotive sector. And there, technically, the effect has been twofold. In Q2, when the world stopped, automotive industry stopped to buy what I explained to you, but also this full supply chain emptied from steel. And now that production resumes, so there is also an accelerated a little bit an accelerated demand because inventories have to be rebuilt.
And that is giving us an advantage in terms of stronger demand. And we hope that this will continue also in next year. But the other question which is important is now construction. The construction market went not down as much and as people need housing. And as governments want to support also infrastructure building, I think that should be okay.
What is lagging behind a little bit is more industrial goods and machinery also because at this moment still also our clients' industry doesn't really invest because they have been very careful in also spending money and preserving cash.
And if you look at the whole world, if I mean, what has happened in the last few weeks, of course, is a change of administration eventually, and it will take us in the United States. Does that mean an end to trade wars between the United States and China? And if so, how does that impact our strength now? Or are you actually, in a sense, immune to the Trump administration's economic policy?
I would not say that we are immune. But as we are a global steel producer, we are present in the different market. And hence, we could also take advantage of the different regions where we are producing. I would say the overall atmosphere was not very good due to all these trade wars. But it was at some time also necessary to tell also countries which have been extremely aggressive in exports because they have huge overcapacities to tell these countries, you need to stop, especially in the carbon world where we do not have a level playing field.
And so from that point of view, I think free trade is one thing. But we are much more we should try to return to a world of fair trade. And fair trade is giving fair chances also to each of the geographies so that they can produce. And what we can do is also with the new administration in the U. S.
And with the European Commission that you should have a fair trade regime, which would be helpful also to cover and to meet all the other challenges we have as an industry.
Mittal complains that roughly 20% to 25% of European steel consumption is coming from countries which basically have quite an unfair cost advantage.
That is absolutely right. And I think that's a problem of not fair regulations on steam trade is the most difficult in Europe. You remember when President Trump introduced 232, there was a big fear here in Europe that the exports which would no longer go to the U. S. Would all be driven to Europe.
And in fact, that happened to some extent. And so we as a steel industry, we argued very strongly with the European Commission to introduce what we called safeguard measures. And safeguard measures were in fact to say imports should not we were asking that imports part of imports should be limited to a certain degree of consumption. In fact, European Commission then say no part of imports will be a number of will be a certain volume. And this volume can grow by 5% per year.
So that was handicapping us quite a lot, especially in the pandemic as well when you see that consumption goes down by 25% or 30% and if your absolute level could remain the same, that could be very, very dangerous. Now in the meantime, we have made some progress with the European Commission because they have developed country specific imports to Europe so that we can at least partially limit some very aggressive imports we see, for example, from Turkey, which was by far the worst, but also for certain categories from Eastern European countries, Russia or Asia or on, who are simply trying to take some group. And hence, we are pleading for maintaining this regime of safeguard measures, which will stop which is today thought to end by mid-twenty 21. And we are today discussing with European Commission so that this is continuous so that we can continue to establish fair trade mechanisms.
Yes. I understand what you said. But if you take the case of Turkey, I mean, presumably, their cost advantage was helped by the near collapse at sometimes of the Turkish lira. And how do you when you get currency fluctuations, it must be terribly difficult to establish this level playing field?
Not so much because you have in the steel industry, you have a big part of your costs, which are in fact international costs. You see raw material costs is in dollar denominated basis of energy cost, if it's based on natural gas or on coal or is by 80% or 90 percent indexed on international pricing. And so when you go through the comparison, currency is helping you, but it was absolutely clear what was the reason of aggressive imports from Turkey is the fact that domestic market was shrinking and Turkish mills were saying, okay, can I have even a small contribution on my fixed costs so I export? So and that was what it was going and it had nothing to do that their competitiveness would have increased, I think, in terms of quality, in terms of delivery also on, they do not match what we can do for our customers. Now the culprit
in the past has always been China. What is the situation now with China? Are they still dumping steel? Or have inventories gone so low in China that things have actually changed?
I think there are 2 movements. The first one is that China, in fact, was a big surprise of international steel markets this year. And in fact, China will see in 2020 its steel consumption going up by 7% or 8% compared to the year before and that despite COVID. And that means how aggressive China has managed COVID and how little harm it had left to the economy. And when COVID was there and in order to avoid negative growth, Chinese authorities, local and national authorities, developed huge infrastructure plans, which explains the search of steel consumption.
And hence, there is not so much room for Chinese steel producers to export steel. I think that is the first element. Then the second element was, remember, when we discussed it several years in a row in our yearly discussions, China had huge overcapacities. And it was these overcapacities which helped them then to dump steel exports to other countries. And this needed to be stopped.
And that was the reason that in almost all of the big steel consuming markets, China had been punished with anti dumping or countervailing duty programs, which are ongoing and which make it much more difficult today for China to import. The question is then if we can stop China to do some unfair trade, problem was Turkey came then back or others came back. And so we have to fight everyone all the time. And that's the reason why we are so active on this site in the different countries.
But you have a stimulus package, obviously, in China. I assume there will be one passed very quickly in the United States. What do you look forward to in terms of North America? Because you've sold us in Natal USA, haven't you? You still have joint venture with Nava.
What is These are different things. I think that if you look at state of infrastructure in America, there is absolutely a need to improve infrastructure and to launch big works to improve the situation. This is something which is ongoing. President Trump was speaking about it, not very much was happening, but it is clear to all of us that one of the responses of COVID, not only in the U. S, but we have seen it in China and also with
the green.
This is meant to try to bring back the economy and it is focused mainly on investment and that should in the long run be positive for steel consumption. Now specifically, why did we sell our American units. I think there are some strategic thoughts, which I like to explain to our shareholders because they might not really understand. The most important one is the solution we have found with Klipsch, who is the buyer of these steel mills is in fact strategic. Our U.
S. Mills in fact had captive sources of iron ore. And these captive sources are now eaten so that they are no longer very much reserves. And hence, the question was how can we establish this captive supply of Golang of ore in the long run. And we didn't see a possibility because the only company in the U.
S. Which is long in iron ore is precisely Cliffs. And so either the model would have been a bilateral monopoly, where you would fight on the price because importing iron ore from Brazil or from elsewhere doesn't work because infrastructure is not there in the U. S. So either you would have a bilateral monopoly or you have an integrated supply chain.
And the Cliffs, 2 years ago, when they were buying AK Steel, they were starting this integrated approach. And it was also for that reason, Cliffs who came and we had these discussions about how can we do best. And at the end of the day, we started to mega state and we thought that the outcome, which was there was by far the best one because it gives a good chance to our mills in the U. S, which are quite high cost mills because they are unionized. They are, to some extent, a little bit older.
They might need a little bit also more CapEx in the future. But they would have a long term secured supply. And when we were discussing, we were also seeing that Cliffs in fact was paying quite a decent price and the price which is not based on Q2 results, but which was really based on mid cycle EBITDA multiples. And on top of that, from Aslomita's point of view, one of the advantage was also that in these mills, there are a lot of past liabilities in terms of pension liabilities or health care liabilities because these companies have huge amount of number of employees and all these liabilities passed all over to Cliffs. So all in all, I would say a good industrial solution for the U.
S. Mills. For us in a very good, let's say, a market price which is okay. And the fact that it helped us to strengthen further our balance sheet with one of the outcomes out of this is that our objective of net debt of SEK7 billion has been through that acquisition. And so that point of view, I definitely believe that it is a win win situation.
And for us, our Mittel, the sacrifice is manageable because we remain quite strong in North America. First of all, we are the owners of Dofasco. And Dofasco is the best integrated mill in North America by no means. It's very efficient, really like similar to our best European plants. And then we have acquired Calvert.
And Calvert is the most modern finishing mill, I would say, in the Western world. And parallel to our investment in carvaux, you probably are aware that we decided also to build in cowvert electric air furnace with a capacity of 1,500,000 tonnes. So that's roughly already onethree of the production of the raw steel will be produced in the Calvert as well, remaining coming then from in the future from Mexico, which is also quite not far away and which can be easily shipped with high quality semis and then the rest from Brazil. And hence, a big part of our automotive customer base and still the presence of we remain a very strong competitor in the U. S.
With a big market share for our key customers and that in combination between Dofasco and covered. So in all, I think a very good deal.
Excellent. You mentioned unions. In that case, it brings me to ILVA. What is happening with ILVA? Wasn't there a deadline yesterday?
That was I
would yes, unfortunately, the deadline has been postponed by 10 days. So we have signed yesterday a paper in
time that
because negotiations were not really finished. And so unfortunately, it's a little bit too premature to tell you what the exact outcome is. But what is important to know is that due to the difficulties we found in Irvine, which had been much worsened also due to COVID, and I would say that has also increased social tensions. We made an agreement at the beginning of the year with the Italian government where we said we need to derisk this venture a little bit. And then we agreed we made an agreement in principle saying that we would change the industrial plan, making it even more greener than it was before because there would be some DRI production in electric arc furnace and glass furnaces.
2nd, derisking it by transforming what was still due to the Italian authorities for buying Ilva, that this would be transformed into equity inside Ilva. And hence, the Italian authorities or company designated by that would become our partners. And third, when we reached with that or in that agreement in principle was that we wanted to have an alignment of interest between the Italian authorities and accelerometer. And in this agreement in I think it was in March, in May, we had also there was one clause to say that if this agreement cannot be made cannot be finalized in the final agreement whereas the deadline is November, was November, CertiS then Asolo Mittel has the right to walk away. And in the meantime, what we say, we want to negotiate in good faith in order to find this solution.
I would say what I hear from the market and the negotiations are not finished, but both sides negotiated in good faith. And the fact that we said we need 10 days more to finalize the agreement is better it's a positive sign. But in these negotiations, you never know.
But do you expect the Italian government, the Italian state to have a majority share?
I think it's too early. The importance for us is we want to I think that Aslomitel will be the industrial operator. The other question is more a question of accounting, who will contribute what. And as there is a need of additional resources, we have to see what these negotiations are going. But I think it will be definitely a partnership model of the different stakeholders because that would be the best point for the company to, 1st of all, to come out of the crisis and to move forward.
Let me just ask Hetar Patel if there have been any questions from shareholders.
Yes. Thank you, John. I think there is a couple actually. Why don't we stay on the theme of Europe? I think first and foremost, you're restarting some capacity in Europe.
However, is there a mismatch between the restarts and the current demand levels? And secondly, in regards to the restructuring cost programs that you've announced, You've recently announced the closure at Krakow in Poland. And at Aras or Mittel, any plans to close further blast furnaces in Europe?
Okay. Yes, these are very, very right questions. So first of all, in terms of restarting capacity, I think that our aim definitely is to be very reactive. And as soon as we see the market move to be able to stop capacity or to bring back capacity. And what we have seen is that we have presently taken decision to restart some of the blast furnaces.
Most recent one will be in Italy, for example, in January, there will be the sub blast furnace in Ilvan, which will be restarted. But we have restarted the blast furnace in Bremen. We have restarted a blast furnace in Dunker. We are operating today the 3 blast furnaces in Tubarau. We are operating the 2 blast furnaces in Post and in Asturias.
So we have brought back some capacities, but we are today, I would say, tight, but we are producing enough, but not too much steel in order to serve our customers. And we have seen that very well in the Q3 with the results with fixed costs, which are the results which were decent and we foresee the same in the 3rd quarter. Now and we will continue to monitor that extremely precisely. There's still some capacity which is stopped. In particular, we have one big realigning in Ghent, which will be restarted because Ghent is a very competitive plant.
But unfortunately, from time to time, you have to restart. So then it is in the 110 days full stop of 1 blast furnace, which is currently and which explains also why we hesitate to restart so many other plans. Now in this context, you mentioned also the decision to close the Crackle blast furnace. What you have to know is the steel shop and the 1 blast furnace in Krakow was in fact relatively high cost units. And what we need and in particular what becomes obvious in crisis times where we see it like that is that if you have high cost units, you cannot work profitably.
And there is a chance in Poland because 30 kilometers from Krakow away, we have the plant in Katowice. And there, we have a very powerful liquid phase. And in fact, it is possible to transfer production there to produce it at a much lower cost, including the handling cost to bring the semis to Krakow so that at the end of the day, we will improve profitability. Why we'll be doing this? So in terms of market share, we will absolutely keep.
In terms of volume in Poland also, we keep it. But we have we can have the same production with less production units. And hence, we are working in a more productive way than it would be otherwise the way. But I can also reassure the question of this shareholder. We do not have now a plan to systematically further do shutdowns.
What we have as a plan is to see we are looking at our asset base regularly. And normally, this passes in the 3rd Q4 when we are preparing our budget for next year. And looking at our strategic developments, we are looking we are making a portfolio analysis and take decisions. And what we have learned also from the 2,008 crisis is that you need to match capacity to final demand. This has made Oslo much more Oslo Mitter much more competitive.
And this is what we are working now. And in particular, now in the budget process, which is discussed now with the different units, we did not say make up proposals to close assets. But we asked another question. And we were asking, in fact, our CEOs and our management teams, what did we learn from COVID? Because from COVID, we learned to take out a lot of fixed costs.
And we say, isn't that an opportunity to take out some part of for final to take out a path of fixed costs in the long run, for example, to make some processes leaner, to make organization less complex. And that is what is going on now. I do not have yet the final results of this exercise, but there will be some good ideas. But I think that we will make much more disclosures on that when we are speaking about the 2020 results and presenting 2020 results in beginning of February and then also give some hints and some guidance for year 2021?
Well, the cost cutting has obviously helped you get to the $7,000,000,000 net debt target, which is rather impressive. And also there was a $500,000,000 share buyback. Is this a change of policy by us and the outlook that will last in which you concentrate more and more on shareholder returns?
Yes. That was what we have said. And I think that the objective to reach SEK7 billion of net debt had, in fact, been fixed, I think, as early as 20 16. And then we had said, this is our goal. And we worked very hard in order to reach it.
And the road which had been we have used since has been the efforts have been tremendous. And simply to recall maybe that you don't have this in mind, but when we entered the crisis of 2,008, Accelomitel had a net debt of $32,000,000,000 that was 1st October 28. Now we are 12 years later and we have brought down this debt from SEK 32,000,000,000 to SEK 7,000,000,000, a tremendous effort, tremendous efforts for everyone. And first of all, I would like to give tribute to all of our people, our management, because it is a lot of efforts also to all other stakeholders, also our shareholders. They accepted that from time to time there was no dividend payment.
They were asked 2 or 3 times even to make capital increase. All that contributed and then we made some portfolio optimization by selling some assets. All these together helped us to reach this objective. Now we have it. And that was also the reason why we said we need now also to honor this and to give some money back to our shareholders.
And that is really what we can start from now on. And which means that also in February, we will make an announcement on how this policy will be seen in terms of dividend policy in terms of buyback policy. But we see to that today, with our benefit of SEK 7,000,000,000, we are capable of generating free cash flow throughout the cycle. We have in parallel reduced the cash we need to run sustainably the business. And so there will be free cash flow available And we will discuss and we are discussing presently with our shareholders what is the best way to give them a significant path of this cash back so that they can get some fruits of the efforts which have been done.
You mentioned the word sustainable. I mean sustainability, of course, is a big project for luxury and retail, in particular for the company in general. What do you have a target of being carbon neutral by 2,050 and reducing it by 30% by 2,030, just 10 years from now. How are we going to do this?
So first of all, I would like to explain that this is really a strategic objective. And the target of 2,050, in fact, is aligned on the objectives which are set in the Paris agreement. And why are we doing it? Because we believe that if we as a small metal in particular, but also in general, if the steel industry can become carbon neutral, then our industry has a huge positive future. Why is that?
Because look what you can do with steel, in infrastructure, in transport, in everyday life. And steel can be recycled through the scrap wood all the time. And if we can also then make the primary steelmaking CO2 free, then we will be part of a circular economy. And we told ourselves, this is something strategically we should reach. Now what and then the question comes, what do we have to do in order to reach it?
And second question is, what other stakeholders and in particular policymakers, the EU Commission, governments can need to do so that it can be reached in the prospect of the Paris Agreement. Now from ourselves, it's mainly first of all, it's a strategic decision. And then it's trying to find out what are the right technologies which can help you to reach this way. And it is in that respect that we have we are developing now a certain number of technologies, which are, by the way, described in our Climate Action Report, where our shareholders can look at on our website, where we say what we can do as a company. And with this portfolio of technologies, we believe that indeed that we can reach the 30 percent reduction by 2,030 and in the long run to become carbon neutral in the long run.
Nevertheless, we say our efforts is fine. But in order to be able to reach it, we need to have a level playing field because these technologies and we can go on later on a little bit, I can describe what the rules are. But these technologies are generally more costly than the traditional way to produce steel. And hence, we say the best would be to have an universal price of carbon, which would be the same for everyone. And as we are technology leaders, we would be the big business.
But that's not the case. And we see the European Union, in particular, moving first. So we are telling we need in Europe, for example, a cross border tax, which means that if cheap steel and CO2, steel with CO2 content is imported in Europe. It should pay a tax for the value of CO2 it contains. 2nd, we think that we need some support in funding some of these investments.
And in a similar way, the governments work, for example, helping to finance renewable energy schemes, because the cost was at the beginning higher than in old gas power works. We say also that at the beginning, we probably need these types of compensations for the steel products, which are green steel products. And it is that what we are precisely discussing. And we are saying we are committed to this is our vision, but we want that policymakers, EU Commissioner, so is also helping with different instruments so that we can altogether reach the objectives of the Paris agreements.
And are you encouraged? And if you look at China now, I mean, China has set a target of, I think, 2,060 for carbon neutrality, which would be a big game changer. I think even Greta might be applauding China as well as asking it out. Do you see the general political climate changing in terms of sustainability and climate change?
I think this is a trend which is extremely powerful. So in terms of China, China did not say how they would like to reach it. I think there's a difference between China today and what does not Italy say that we are trying to trace the way how we want to achieve it and what is necessary. But if China is serious with this objective, I think it would be absolutely a great news. But it means also that in the future then the Chinese steel industry will be a strong competitor.
But we do not see a strong competition provided that it is fat competition because we believe that in the steel industry as well in technology as in the steel products, we are really a technological leader. Thanks to our R and D people, thanks to the imagination of the people, thanks to the cooperation with our big customers. And so from that point of view, we do not fear competition. I think it should even accelerate, but it should be the same rules for everyone.
But are you assuming also that there will have to be technological innovation of a huge sort, I mean, with HyggeM, for example.
Absolutely. And basically, to tell you, there are 2 avenues how to reach these goals. The first one is indeed hydrogen because in fact today you need coal to extract the oxide which is in the iron ore and then you emit CO2. If you use hydrogen, then you use hydrogen as absorbing the oxygen and you emit H2O, that means water. And that is CO2 free.
But in order to make this way, what do you need? 1st of all, you need huge amounts of hydrogen, which has to be fabricated through green energy. And this is a huge amount and probably not achievable in the level of 2,030. And second, you need to replace the blast furnace in the traditional way how you produce steel and to substitute it with the kind of DRI production, which is produced based on oxygen. And we are piloting this technology in our plant in Hamburg because Astra Metal is the sole European producer who owns the DRI unit in Hamburg.
But we believe this cannot be the only solution at least at the horizon of 10 or 15 years because CapEx is too expensive and energy is not available. Hence, we are working on the 2nd avenue of different technologies. And that is to do this is what we call smart carbon technologies. Some of it is, for example, to extract CO2 and to transform this CO2 into a product which is substituting fossil energy. For example, we have such a plant in Ghent, where we produce BioBio Ethanol, which is combination of CO2 and the kind of special enzymes.
And this product can be used in the chemical industry or as a fuel for engines. And so this is a good way. And hence, you do not use oil for this production. Other thing would be to substitute coal with, for example, biomass.
Do you think you'll get to a point where ArcelorMittal's iron ore mining sector becomes less important?
I don't think so because it's a question of iron ore sector is that as strong as steel consumption is growing, there is not enough scrap to scrap availability. Today, available scrap is recycled by more than 90% on the global world. But we are consuming today the scrap, which is the steel which had been produced on average in the 70s or 80s. At that moment, global steel production was 700,000,000 tons. It's today 2,000,000,000.
And that's the reason why today in our the use of scrap in the global steel industry is only 30% and this needs to come up. And as long as you have a positive growth of steel consumption, you need to have iron ore mines to produce. And I think that we are extremely happy as Aslomitel to be owners of very competitive mines because it makes us it gives us a longer value chain. And especially in times like today where the iron ore price is very high, it helps us definitively to have better financial results than those of competitors.
And you're now expanding the plant in Liberia?
We are expanding the plant in Liberia for because the project is absolutely attractive. Liberian iron ore reserves are low iron ore and I would say of low quality. And what we are doing is building, investing in what we call in technically driven, a beneficiation plant. And the beneficiation plant is in fact to transform this poor iron ore into high grade, high quality iron ore, which sells with a premium on the market. And we are doing in fact, we are finishing an investment which had been started into earlier 7 or 8 years earlier and pretend to be stopped at the moment when in Liberia as well as Ebola pandemic and when everyone had to leave the company.
So this is now relatively small investment for a huge project and that is what we are starting at. It should be highly compelling indeed. And even with, I don't know, prices, which will be much lower than the ones we have today.
We don't have much time left. Let me just ask Hetal for more questions.
Yes. Thank you, John. I think we've got 2 more questions actually from participants. First of all, India. So I'll ask them at all.
India, how are those assets performing today with the COVID pandemic? And can you give us an update on your growth plans and time lines and any further funding required to grow those plans?
So you remember, I think it's good to speak to say a word about India because today, the Indian steel market is probably the market which will grow the most over the next decade. And some people say it will even more than double from the present 100,000,000 tons of capacity. And it is a market contrary to China, which is already quite consolidated because basically you have 4 big producers of flat steel, which is GSW, Tata, SAIL and now ASLAMITAM and SC, so former S and S. Steel. And so from that point of view, this was absolutely a strategic move and definitely not an emotional investment made by Mr.
Mittal. And I think the fact that it was done together with Nippon Steel is good in terms of technology, in terms of support. And in fact, the India and the ESSA acquisition had been structured in such a way that it is self financed with the equity, which had been put in by the 2 shareholders. So first of all, integration went extremely well. And I would say from and the economic results are excellent.
Today, we are running full. In India, we are at the run rate of €700,000,000 of EBITDA per year or more than €700,000,000 for the total production of 7,500,000 tons. And there is a potential to increase production further in the next run. So it's the first increase and the first growth we will do is that we will increase the pellet production to 20,000,000 tonnes by the end already of next year because we have very good iron ore also where we can produce pellets, which is quite a valuable rate. And then we are evaluating today is a possibility how we can grow.
Probably with small brownfield investments, we can improve, we can increase by €1,000,000 or €1,000,000 at that. But the long term vision would be to double or even more to double the production of, say, AM and SC in order to remain one of the big players and to have at least 10% of market share in the Indian steel market.
I mean, India could be the real jewel in the crown, couldn't it, if you've got 6% annual growth every year? I mean,
basically I would not say ZEJUL, but one of the jewels of ZEKTROOM, definitely good. And if I can make a comparison with another emerging market where we have done very good experience, which was Brazil in fact. Because Brazil has huge comparative advantages for making steel. India as well, because it has iron ore, it has a growing market. It is almost going to be become industrialized.
So more and more sophisticated steels, we can bring all our know how here and there beat competition in terms of quality of steel. So the overall perspective is extremely good. And that's the reason why we are so excited about the Indian venture, which will definitely be in the future one of the elements of growth of the group.
We haven't mentioned the CIS countries. What are the prospects there? And they seem to be much weaker than India and Brazil, for example.
I would say I would distinguish. So ACIS is in fact 2 continents. It's one site Africa and then this other site our plant in Tenerpau and in Ukraine. And if I look at the present situation, I would say that South Africa is much more problematic than the CIS countries because South Africa was lacking competitiveness. And in fact, there is a problem.
Steel consumption is going down. There is no competitiveness to export from South Africa. And hence, we are really in the restructuring mode and we have suffered quite a lot in order to do our best since that improving. So it's not from a global point of view, you can say that the evolution in South Africa was not as positive as in many other geographies. Now regarding CIS countries, there we have the advantage of having captive mines.
And so we are producing the full range of products in Kazakhstan, and we are producing mainly long products and semi finished products in Ukraine. Fortunately, we are not in the Donbas region, so we were not we did not suffer so much from the civil war and the events in Ukraine. And I would say that with a very high iron ore prices we see today in the world, we are producing a very competitive cost in Ukraine, but also to some extent in Kazakhstan, which is further away. And we are competing there well with Russian producers because our overall cost situation is quite good. So from that point of view, I would say good improvement.
Now they have suffered a little bit more. Last year, they have suffered from the COVID as well, but they are developing now satisfactory.
Michel, we only have a couple of minutes left. And I think the horizon is looking actually pretty good. But presumably, there can still be some dark clouds. What are the risks that you see ahead that somehow Asim Itall will have to confront?
So we say the horizon is good, but we have to understand that 2020 will be a year with very low EBITDA because we will be historically low. So it will be the lowest EBITDA level over the last 10 years. So we are in a very dark situation. Now starting from this, we are making good progress. You're absolutely right.
Demand is going up. Recently also, transformation margins have gone up. And indeed, my comments have been quite positive because also I think that Acelot today is in a position of strength in terms of competitiveness. We have done our homework in 2010 to 2015 when we made all these heavy restructurings. We have had the 2020 plan to reduce cost.
We have made strategic moves. We have reduced very much our cost of capital. We have reduced interest payments. We have reduced our next our net debt. So from that point of view, we are today, I would say, our equilibrium level is much lower than it has been before.
And that is what makes us really safe that we are positive and we are able today, as we have shown in Q3, to deliver free cash flow even if the overall market situation is very, very valid. That gives us some good insight of optimism and also, I think, a positive message to our shareholders that we can deliver results and that we can deliver cash and dividends of buybacks while we will continue to invest to be a good employer and to continue to try to make this business sustainable.
Michel, that is a perfect note to end on. We've had our thank you very, very much for all your help. And thank you also to Headout and the people behind the scenes for their help. I want to wish you all a very good festive season. And also, I'd like to thank our viewers for tuning in, and I'd like to wish them good health and a very good end to this year.
It's been a dreadful year in many respects, but not I think for Assimilitas shareholdings. So let us hope that things continue to do well. And I wish you all a very, very good Christmas and New Year. Thank you very much.
Okay. Thank you as well, John. I think it was great to have this session with you. I think you said it very well for our listeners as well. We wish them all the best.
And I think that we could pass them the message that we try to take care of the company, of our people, of all of the stakeholders in very tough times, but everyone has done a marvelous job, I would say, and continues to do so. And so I think that from that point of view, the prospects are positive. And so I want to join you by wishing to all of our people, all our shareholders all the best for year end. 1st of all, a good health and second, rapidly an FXIN and third, a very, very good and prosperous New Year 2021. Thank you.
Thank you very much, everyone.
Thank you very much.