We arrive at a DCF-based valuation for the steel and mining business using a WACC of 8.0% and a terminal growth of 1%. To this, we add the value of its stake in associates and JVs at a discount to the book value. From that value, we reduce pension liabilities, net debt, and minorities to arrive at our target price of EUR40/share.

We identify the following risks to our investment thesis and achievement of our target price: ArcelorMittal's net debt reduces investment flexibility. ArcelorMittal shares are sensitive to spot steel prices, contract renegotiations, and raw material input costs. These represent both an upside/downside risk. ArcelorMittal has high fixed costs, and high net debt overlays financial gearing to already high operational gearing to the cycle. Moreover, if the EU protectionist measures are scaled back or steel prices decline more than we forecast, these could represent downside risks.