HomeMost PopularInvestingArcelorMittal Yields to Decarbonization, but Is the Company Going Green or Just...

ArcelorMittal Yields to Decarbonization, but Is the Company Going Green or Just Greenwashing?

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ArcelorMittal MT Asturias inked a deal with industrial engineering firm Sarralle to build a new electric arc furnace (EAF) in Gijon. This marks a big win in the company’s decarbonization strategy for Spain.

Green Steel Initiative

The civil works, set to commence early next year, are expected to wrap up in late 2025 when the 1.1 million-ton EAF becomes operational. This will enable the site to shift to producing low carbon-emission steel, focusing on long products such as rails and wire rods. The move from the conventional blast furnace route is anticipated to boost competitiveness, especially in sectors with stringent carbon criteria for public procurement contracts.

Maximizing Efficiency and Energy Recovery

As part of the project, Sarralle will install a de-dusting system and a waste heat recovery unit to increase energy efficiency in the new EAF. This initiative aligns with ArcelorMittal Europe’s commitment to reducing CO2 emissions by 35% by 2030.

Strategic Impact and Future Demand

Sarralle has stressed the historical significance of the project as Spain’s first step towards decarbonization, accomplished through the use of local technology. The company highlights the transformative influence this initiative will have on the Spanish steel industry, specifically in the development of high-value-added products.

ArcelorMittal also underscored the strategic positioning of the Long Products business in Asturias as a pioneer in decarbonization, emphasizing that the integration of state-of-the-art technology will not only streamline production but also play a crucial role in fostering a sustainable future while upholding the highest safety standards.

With the anticipation of increased rail traffic outlined in the European Union’s Sustainable and Smart Mobility Strategy, the new facility in Gijon is positioned to meet the rising demand for rails made from low carbon-emission steel.

Financial Outlook and Stock Performance

In the past year, ArcelorMittal’s shares have declined by 5.9%, compared to a 16.1% rise in the industry.

In the third quarter of 2023, ArcelorMittal reported earnings of $1.10 per share, slightly lower than the year-ago quarter. However, it exceeded the Zacks Consensus Estimate of $1.03. Despite a 12% increase in total sales to $16,616 million, the company fell short of the consensus estimate of $17,075.1 million, primarily due to lower steel prices. The company foresees 1-2% year-over-year growth in global steel consumption (excluding China) for 2023.

Capital expenditures for 2023 are projected to range between $4.5 billion and $5 billion. Additionally, strategic projects are expected to contribute an additional $1.3 billion in normalized EBITDA.

Is It All a Facade?

While the announcement of the new EAF appears to be a major step in the direction of sustainability, there are concerns within the industry regarding the authenticity of such initiatives. Some experts argue that companies may engage in greenwashing, where they portray a misleading impression of their environmental efforts.

Investment Perspective

ArcelorMittal currently carries a Zacks Rank #4 (Sell). However, investors can explore other options such as Axalta Coating Systems Ltd. (AXTA) with a Zacks Rank #1 (Strong Buy), The Andersons Inc. (ANDE), and Alamos Gold Inc. (AGI) which both carry a Zacks Rank #2 (Buy).

Despite the hype around ArcelorMittal’s decarbonization efforts, caution is advised when considering investments in the company, as the genuineness of such initiatives remains a topic of debate.

For smart investors, it’s critical to analyze the green initiatives of companies and not just take them at face value.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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