Prepared remarks
Hi. Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress during the third quarter of 2025. Leading today's call will be our Group CFO, Mr. Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which was published this morning on our website. However, I do want to draw your attention to the disclaimers on Slide 20 of that presentation. As usual, Genuino will make some opening remarks before we move directly to the Q&A session.
Thanks, Daniel, and welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief, beginning with safety, a core value for our company. The company is completing the first year of its 3-year transformation program, supporting ArcelorMittal's journey to be a zero fatality and serious injury company. The first year has focused on building the foundations for improvement across the business, and I'm encouraged by the progress we are making. We are already observing an improvement in the frequency of serious injuries and fatalities compared to last year. But there is more to be done, and there is clear determination across the entire company to implement the bespoke safety road maps that have been developed to drive lasting change. Now I want to focus this quarter on 3 key points. First and foremost, our results continue to demonstrate structural improvements.
Third-quarter EBITDA per tonne was $111. This is 25% above our historical average margin. To be achieving such improved margins at what we believe to be the bottom of the cycle demonstrates the positive impact that our asset optimization and growth strategy is having. Our strategic projects, together with the impacts of recently completed M&A will support structurally higher margins and returns on capital employed through the cycle. We remain on track to capture $0.7 billion structural EBITDA improvement this year, and the expected medium-term impact of $2.1 billion remains unchanged. My second point is on free cash flow. Our underlying business continues to generate healthy cash flows. Excluding working capital, 9 months free cash flow was approximately $0.5 billion positive. Remember, this is after having invested close to $1 billion in our strategic growth projects. As we head into year-end, I expect that working capital investment will unwind as it normally does.
This supports the positive outlook for free cash flow and lower net debt. And then my final point is on the positive outlook for our business. Relative to where we were 3 months ago, the outlook for our business has clearly improved. We welcome the new trade tool proposed by the European Commission. They will support a more sustainable European steel sector, returning the industry to healthier capacity utilization levels. The proposal must now be transposed into legislation as fast as possible. And together with an effective CBAM, this can provide a solid foundation for our European business to earn its cost of capital as we have been achieving in other regions. With our advanced product offering and strong market franchises, we are well equipped to seize new structural opportunities and translate them into profitable growth. As a company, ArcelorMittal is actively enabling the energy transition.
We are supplying the steel required for new energy and mobility systems and the steel required for infrastructure development. We are investing in high-quality, high-margin electrical steels and building a competitive renewable energy portfolio. Putting this all together, ArcelorMittal is in a strong position, both operationally and financially. We have a unique diversified asset base across geographies and end markets. We are delivering structurally higher margins, supported by an optimized asset portfolio and execution of our strategic growth projects. We have momentum and our growth will continue. We will continue to implement our clearly defined capital return policies. It is working well, allowing us over the past 5 years to grow our dividend at a compound rate of 16% as well as repurchase 38% of our equity. Each ArcelorMittal share now represents a greater proportion of our capacity, a bigger share of our leading franchise businesses, a larger stake in our growth projects, and a greater ownership of our unique business in India. With that, Daniel, let's move to Q&As.
Great. Thank you, Genuino. We have a good queue of questions in front of us. But we will take the first question, please, from Alain at Morgan Stanley.
Questions and answers
Genuino, I have two questions. I'll ask them one at a time. So the first one is looking forward to 2026 and before we take into account any impact from CBAM or the new safeguard, what are the unusual or exceptional costs that we need to consider while building our EBITDA bridge into next year? And I'm thinking here more the incurred U.S. tariff costs year-to-date, the stoppages in Mexico, etc. That's my first question.
Sure, Alain. When looking ahead to 2023 in terms of exceptional costs, I can't specifically identify any changes related to tariffs at this moment. We expect to have more clarity by 2026 with the USMCA and ongoing negotiations between Canada, the U.S., and Mexico. We'll need to observe the outcomes of those discussions. Additionally, we anticipate that the losses we've experienced in Mexico won't happen again in 2026. Regarding other exceptional factors, we see several positive aspects as we approach 2026. For instance, our projects will contribute another $800 million in 2026. We recently received the first demand forecast for the next year from the World Steel Association, and it's likely that the effects of lower interest rates will start benefiting economies. We're also observing improvements in PMIs across Europe. Demand has largely been stagnant in our main markets, but there is potential for a more favorable outlook for next year in terms of demand. Daniel, please let me know if there's anything I've overlooked or if you'd like to add anything.
Thanks, Genuino. So all I was going to do is perhaps just adding the numbers for Mexico. So if you recall back to the Q2 conference call, at Q2 results, we talked about a $40 million impact from costs and operational costs in Q2. In our release today, you will see a number for Mexico of $90 million. And then in Q4, things should improve, but there will still be a cost in Q4 of maybe $60 million, $65 million. So as Genuino said, that shouldn't recur in 2026. So then when you think about the bridge from 2025 to 2026, that is close to about $200 million there from nonrecurrence of Mexico.
That's very clear. And the second question is in Europe, you currently ship around 30 million tonnes of finished steel. If the safeguards work next year as intended or designed and imports dramatically reduce, how much can you flex your production in the near and medium term after taking into account the restart costs, the purchase of CO2 allowances, etc.? So in other words, what is your achievable Blue Sky shipments in Europe if we go into that scenario where imports decline dramatically?
Well, the way we see it, I mean, we do expect to be able to supply the market. I mean, as we all know, the expectation looking at the numbers, I mean, there is an expectation that imports will come down by about 40% and flat as we saw, right? And it's not a secret that our market, it's about 30%. So we don't see any problems to make sure that we can capture that part of our market share. And you know, I mean, you have that also in our back book. So our capacity in Europe is way in excess of 30 million tonnes that we are currently producing. So we feel very comfortable here to be in a position to supply the market when these new measures are in place.
Great. So we will move now to the next question, which we're going to take from Tom at Barclays.
Two for me as well. The first one, just the usual one on the kind of moving parts, maybe, please, into Q4 by division? And any color around realized pricing, volumes, that kind of stuff.
Do you want to take it, Daniel?
Yes, sure, Genuino. So when we look at the bridge from the third quarter to the fourth quarter, I think it's pretty simple. I think there are really 3 key building blocks for you to be thinking about. The first, of course, is the normal seasonal improvement in European volumes. The second factor or the second building block would be higher iron ore shipments. So as Genuino was talking about, we have good momentum in our strategic projects. So we're well on track to achieve the targeted 10 million tonnes of shipments in Liberia. And so that will be a nice increment in the fourth quarter. And then the third building block would be North America. So we would expect normal seasonality in volumes. So we do have 2 holidays in the fourth quarter. So normally, volumes are seasonally weaker in the NAFTA segment. If you look at pricing and if you just purely on a sort of a 2-month lagged basis, pricing should be lower in the fourth quarter than the third quarter, but that's going to be slightly offset by the improvement in our Mexican operations, which we just talked about in Alain's question. So those would be the 3 key building blocks: seasonally higher volumes in Europe, higher shipments in mining from the Liberia expansion and seasonally lower volumes and lower lag prices in the North America segment.
Great. And then maybe just following up on North America. I mean, is there anything else that you guys would call out for the print in Q3, which I guess was very strong despite the sort of additional Mexico outages. I know you've added Calvert, but I guess, on the consolidation numbers you've given before, that was maybe sort of $60 million a quarter of incremental EBITDA contribution. So maybe that offsets the hit from Mexico, but U.S. spot pricing has been drifting. There's obviously extra tariff costs. Was there anything on either the cost side, the mix side that you flagged for North America?
Yes, Tom. First of all, we experienced record shipments at Calvert, which is performing exceptionally well. I would suggest that its contribution was actually higher than what you mentioned. Our Canadian team is also excelling in managing their operations. There is a significant emphasis on reducing costs, which is positively impacting our results in the third quarter. So, we have strong operations at Calvert and in Canada across both facilities. Additionally, our HBI DRI plant in Texas is also delivering good results. Overall, aside from the issues in Mexico, our franchise business in North America is functioning quite well.
So we will move now to the next question, which we're going to take from Cole at Jefferies.
I'd just like to ask on the CapEx profile medium term and the envelope that you're thinking about because you do have a number of strategic projects in the pipeline. How should we think about broad buckets for CapEx '25, '26, '27? Any broad-based guidance you can provide? And then following up on working capital, it's a strong improvement into the fourth quarter coming back, but I imagine as you look into 2026, hopefully, we will benefit from a stronger pricing environment. And I'm just wondering how you're thinking about working capital into 2026. Are you hoping for kind of working capital outflows and stronger pricing and demand environment for 2026?
In terms of capital expenditures, we will soon begin our budget discussions for 2026 and beyond. For now, I recommend using the range we've communicated over the past few years, which is between $4.5 billion and $5 billion, including strategic sustaining maintenance. This is a good reference point. We will share more details in Q4, but this range is appropriate for now. Regarding working capital, I hope that by 2026, we will need to deploy some, as that would indicate a strong and well-performing business, with prices and volumes moving positively. It's important to think about working capital aligning with our EBITDA. If you anticipate high EBITDA numbers for 2026, it would be reasonable to expect potential investments in working capital, which we view positively.
And then maybe just as a follow-up, have you seen any changes in order books? Or how are you managing your order book for the start of 2026? Are you keeping some availability for higher prices? Or how are you seeing your order book develop into 2026?
The demand has been stable, and our order book remains relatively consistent. We have some segments performing better than others, but overall, the order books are stable across the group. We are not taking any special actions to prepare for a potentially stronger 2026, other than ensuring that the business retains the necessary working capital to benefit from the anticipated improvements in 2026. That's our approach, and that's our current perspective.
Great. So we're going to move to the next question, which we'll take from Reinhardt at Bank of America.
Can you hear me?
Yes, we can. Go ahead.
I just want to ask on capital allocation. So if the safeguard replacements in Europe come through in their proposed form, how would you think about Europe from a capital allocation point of view? And I don't want to necessarily draw into discussion about sort of decarbonization investment in CBAM. But just from a purely economic perspective, you talk about organic growth. Do you think Europe could be a home for capital in the future if we get this framework?
I think you touched on it. I mean this is an important framework, right? And then what we are talking about is that this framework should allow the industry to be sustainable, to earn its cost of capital. And when you achieve that, then you are in a position to consider then investments. And that's exactly where we are. And so we are encouraged by these new measures. Of course, still waiting for the implementation. We still need to hear more about CBAM as we all know. And then the last piece of the equation is, of course, energy, energy cost. So I think once we have that framework very clear, then we're going to be in a position to move forward. And as we discussed before, this will happen gradually, right? So you should not expect ArcelorMittal launch a number of simultaneous projects. It will happen gradually. This is going to be a multiyear journey.
Understood. That's very helpful. And could you just remind me, I mean, you mentioned the business in Europe could potentially return to its cost of capital. Could you just remind us what exactly is the installed capital base of the European business?
Well, I don't think this is something that we are very specifically disclosing.
No, you're right, Genuino. It's not something that's broken out in our financials.
Okay. No, that's fine. Maybe just one last quick one, Genuino. You mentioned that you've got the capacity to be able to deliver effectively your share of the 10 million tonnes. Can I just see what kind of costs you might need to incur in order to bring that capacity to market? I mean I appreciate it's there, but could you just maybe talk through some of the costs that you need to incur to actually get that utilization up?
Yes, that's a good observation. I would like to break it down into two parts. First, we have the fixed cost aspect. In several facilities, we will be able to utilize our fixed costs better by operating at a higher capacity, which will benefit us on that side. However, you will also likely see an increase in variable costs, such as CO2 costs. To enhance productivity, we may need to use higher quality materials and more pellets, which will also affect costs. So, I encourage you to consider both of these components.
So we'll move now to a question from Timna at Wells Fargo.
I wanted to ask two things. First, can you provide more details about your efforts to reduce tariff costs and how you are handling the annual contract negotiations with automakers at Dofasco? Second, if I missed it, I apologize, but I was curious about why there were no buybacks this quarter.
Yes, we are actively renewing our OEM contracts and are nearly finished with the first half of next year. We are signing agreements longer than a year, and our customers are satisfied with the products and services they receive from Dofasco. We anticipate stable cooperation with our customers, and we don't expect significant changes in our North American automotive business volumes. The only potential for lower production next year could affect this, but that's not what we're discussing now. Regarding buybacks, there's not much more to mention. We have a clear policy that sets us apart from many competitors. Thankfully, we executed many buybacks earlier this year when share prices were low. You can expect that the company will continue to adhere to the policy of distributing 50% of free cash after dividends to shareholders. Additionally, the policy has been successful; we've already repurchased 9 million shares this year at a low average price, creating significant value for our shareholders. Daniel, would you like to add anything?
Yes. Thanks, Genuino. I think that was very complete. So we will move to the next question, which we will take from Tristan at BNP.
First one is on working capital. Just wanted to see how confident you are on the almost $2 billion of release that you expect in Q4? And what should be driving that? Is there any impact from outages at Fos or Mexico? And isn't there a risk of reducing inventories a bit too much and missing the recovery in Q1? And if you can discuss that as well. Is that not your base case that notably in Europe, you'll see a bit of a pickup in Q1? And also if you can comment on the CBAM uncertainty. And does that have any impact on your order book in Europe and pushing more buyers towards local producers? That's my first question.
Yes. The working capital release in Q4 is somewhat seasonal due to having fewer working days in December, which affects our year-end receivables. Additionally, we saw a reduction in payables as we prepare for a potentially stronger 2026, so we are also starting to increase that, which should normalize soon. There are a few one-offs to consider, like lower production in Mexico and some accumulation of raw materials that will also begin to normalize. We are currently relining our Dunkirk blast furnace, and we're normalizing the inventory of slabs. We are confident that you will see a significant release of working capital similar to last year. Looking ahead to 2024, you can expect something very comparable. We are cautious about not over-squeezing the working capital available to the business. Therefore, the changes will be more evident in receivables and payables rather than in inventory levels.
Okay. No, that's clear. And just following up then on Europe and with the steel action plan, do you believe that there is a possibility of seeing the new quotas implemented before July next year? And to come back to my earlier question, what kind of environment do you see in Q1? If the quotas are not implemented in January, April, but in July, do you see a risk of imports surging? Yes, and if you could comment a little bit on your order books in Europe, if you're starting to see a bit more activity there, that would be helpful.
Yes. Regarding the timing of implementation, there is still some optimism that we might see it sooner than expected. It is crucial to ensure that parliament and the council recognize the urgency of implementing these measures as quickly as possible. While it's challenging, there remains hope for earlier implementation, but we will have to wait and see. One certainty is that we don't yet know all the details of CBAM, but it is set to be effective from January 1st. Once it is in place, we can expect it to make imports less competitive. As for the order book, it remains stable and not significantly higher than usual, reflecting that current demand is fairly steady.
Great. So we'll move now to take a question from Max at ODDO.
So my first question is on Mexico. So this is an asset where you have had a number of issues over the recent past. So there was this illegal blockade last year. There was the outage on the EAF earlier this year, and now there's this problem on the DRI plant. So how confident are you basically that the asset can return to a normalized productivity and performance and that on a recurring basis from next year?
Yes. That's a fair question. And then, of course, we are not pleased. Some of the problems that we are facing this year, they are still a result of the legal blockade that happened last year. And what we are doing right now is really reviewing all of our SOPs. So we have our engineers, we have our CTO group going through all the procedures, making sure that we avoid repetition of some of these issues. So I'm very confident that with the support of the group, CTO and local team also very engaged, we're not going to have a repetition of some of these operational issues in Mexico.
Okay. And then a second question is on the import pressure in Brazil and India, which seems to be quite high at the moment, and it's reflected in very low prices. So it seems that the authorities there are not really willing to tackle the situation at this stage. So how are you confident that this will be the case? And would you be ready to scale back your investments in Brazil if that's not the case, given that I think one of your competitors has done such a move and Brazil is still the biggest region where you invest at the moment if we leave aside Liberia.
Yes, in the mid to long term, we remain optimistic about Brazil and plan to continue our investments. While it's true that imports have been increasing in Brazil, we're maintaining close communication with the government about global trends. It’s promising that several antidumping measures should start having an effect by the end of this year or early next year. We have implemented antidumping against Chinese cold rolled products, which we sell domestically, so this should yield positive results. Our current system is designed to allow for adjustments if we encounter surges in other products, which could be included in the quota systems we have established. There has already been a reduction in imports in the third quarter compared to the second. The existence of antidumping measures is a good sign, indicating government concern. Local mills have also announced price increases at the beginning of the quarter, and we’ll see how this evolves. As for India, demand remains very strong, showing good economic performance. While prices are low, there is an effect from new capacity that typically takes time to fully integrate. We are in that adjustment phase now, but we can be optimistic about the near future.
Okay. And just perhaps the last one is on Ukraine. It seems that the challenges there have gone bigger in recent months in terms of railways, in terms of electricity costs. So is there a point where you will consider shutting down production entirely? Or are you still committed to maintaining production as it is for the time being?
Yes, you are correct about the situation in Ukraine. Currently, we are operating at nearly full capacity with two furnaces. The trend is positive for EBITDA, but we are not yet achieving free cash flow neutrality as previously mentioned. The primary challenge we face remains the high energy costs. We are actively engaging with the government to emphasize the importance of reducing these costs to sustainable levels, especially amid the ongoing war. Our plan for now is to continue production, and our mining operations are also nearing capacity. This allows us to sell iron ore either to our own mills in Europe or to third parties. Overall, we are managing through a very difficult situation.
So we'll move now to take the next question, which is going to be from Bastian at Deutsche Bank.
My first one is on Europe, and can I please come back on the situation here in the context of the policy plans? So when you look at the European capacity landscape, do you believe that the current capacity, which is in operation, would be enough to pick up the additional market share, which the domestic industry would likely absorb from the imports? Or would this 10 million tonnes, which you referred to in the chart require idle capacity to restart? And then maybe just as a quick add-on to that, are you generally more positive on the volume or the price leverage for your business from the policy, which has been laid out? Those are my first questions.
Yes. I think it's clear, as highlighted by the commission in Europe, that capacity utilization in Europe is currently low. The goal of some trade actions is to help the industry achieve a more sustainable level of operation. It will vary depending on the region in Europe; in some areas, there may be a need to activate some idle capacity. This can lead to higher costs due to the lack of benefits from fixed costs. It's challenging to be precise about this. What we prioritize is ensuring that the industry operates at a decent level of capacity utilization. Achieving this allows us to cover our capital costs and optimize our overall cost structure. That's our perspective on the situation.
Okay. And just in terms of the leverage for your own business, when you look at the gives and takes, are you more positive on the price effect? Or are you more positive on the volume impact on your earnings contribution?
Well, I don't want to be drawn on that. I think for us, as I said, what is important is that we can run our facilities at a higher capacity utilization, right? And that should be then, if you have less imports, which as we know today, the cost or the price of imports is so low, right? Daniel, do you want to add anything to this question?
Yes. So I think like you're saying, it's very difficult to isolate the sort of contribution of the fixed cost absorption, the sort of operating leverage or the impact of just higher industry utilization on spreads. But I think I'm sure you've analyzed this in the past that, Bastian, there's a good correlation between spreads and utilization. So there should be 2 factors, and those 2 factors should contribute to what Genuino is talking about, our business in Europe, the industry in Europe being in a position to covers cost of capital. And that's ultimately the objective here.
Okay. Sounds good. And my next question is on North America. And I guess one of your Canadian peers here is heavily loss-making. Could you maybe give us a bit of color on how Dofasco is actually performing on a single entity basis? And are you still making money there?
Yes, absolutely. Dofasco is one of the best facilities in the world. And so it's still very much profitable.
Okay. Great. And then very last question, just on your expansion strategy in Hazira. Is that on track? And just, I guess, given what you discussed earlier in terms of the capacity, which has been brought on already this year. Do you think the market is ready for the ramp-up next year as you're planning it?
Yes. I think, first of all, our projects are ongoing and going well. So we're going to be, as we discussed, commissioning some of the finishing lines still later this year, beginning of next year. And then during 2026, we're going to be completing the upstream, including coke batteries. And a lot of the new capacity has just come down. So I think we're going to be in a good position to ramp up our own capacity. So allowing some time so the market can absorb that. So I think in terms of timing, it looks good, Bastian.
Great. So we still have a few more questions to take, Genuino. So the first of those we will take from Dominic at JPMorgan.
Just a couple of quick questions on, again, sort of real-time indicators of demand. You obviously have a seasonal slowdown in the North American market. But are you seeing any visible signs of kind of new pockets of weakness in the U.S., particularly given the government shutdown? And then my second question relates to Europe and the auto segment. Do you have any insight you can share with regards to how you're approaching contracts moving into January?
Yes. Starting with the U.S., you're correct in noting the demand is relatively stable. However, Calvert is operating at full capacity, and we've achieved record production and shipments. Our focus is on the energy and automotive segments, both of which are performing well. In Canada and Mexico, there are promising opportunities as domestic demand has been significantly affected by the evolving relationships between governments in North America. We anticipate stabilization in these regions, which should aid shipments. Regarding auto contracts, we have much to offer automakers. In North America, negotiations will take place gradually throughout the year, while in Europe, they will be more concentrated at the start of the year. This ongoing process should lead to agreements that benefit both parties.
Is there any sense that the price tension that we've seen over the last 2 years could alleviate this time around?
Yes, we do not comment on specific prices, as you can understand. These negotiations are specific, and we refrain from discussing prices. However, the spot price serves as a reference point. We are observing price increases in Europe and a rise in North America as well. Price increases have also been announced in Brazil. Overall, the environment appears to be positive.
So we will move now to Andy at UBS.
So just to go back to the European question about the CO2. Can you just remind us what your emissions are likely to finish at in 2025 if we assume the normal seasonal uptick in 4Q and how that compares to your free allocation levels this year? And going into 2026 with the reduction of the free allocations, and I guess at some of your sites, you produced less in recent years, so you may lose some free allocation because of lower production. Can you give us an idea by how much you expect your free allocation to change next year? And maybe as a follow-on to that, are there any assets which are kind of emitting less the reallocation where the uplift in production would have minimal cost on the CO2 side. Just to give us an idea for how much you could ramp production easily.
Andy, there are many moving parts when it comes to the DTS system, as it is complex. In Europe, most players are falling short of the benchmarks. A good rule of thumb is that you're paying CO2 costs for about 20% of your production. That's a rough estimate to give you an idea. When we look at our operations, it’s often based on an average; it involves technical details. We don’t expect to see a meaningful loss of free emissions by 2026 due to operational levels. However, there will be gradual reductions as CBAM is implemented, and we need to consider that along with revisions to the benchmarks. That’s the current situation.
But you don't have a number of credits reduction that you expect for next year?
Well, I mean, we all know what's going to happen in terms of reductions. There is a 2% reduction in the DTS system, the 3 allowances, right? And then we have to see what happens now with the benchmarks. So it's too early to talk about it. I would just add that what is important here also is now with CBAM, right, and to the extent that CBAM is effective, then at least you are at par with imports. So they will be paying the same costs, right? I think I would encourage you also to see to the extent that costs increase in Europe, but you have at least the same cost being applied to imports, at least there is a level playing field in that regard, right, which is, I guess, what the whole industry in Europe has been advocating.
That's clear. I have one more question about Canada. Recently, there was a document discussing medium and heavy vehicles, issued by the White House, which mentioned possible exemptions for auto-grade steel from Canada. This could reduce the tariff from 50% to 25%, depending on certain investment conditions in the U.S. I'm curious about your interpretation of this, as it seems a bit unclear to me. If you have a U.S. asset that you are actively investing in, do you see any potential to leverage this recent announcement to lower the tariff from Dofasco into the U.S.?
My understanding is that the negotiations at this point in time, as we all know, they are suspended, right? And we are hoping that they will resume the negotiations. And then we'll see finally what comes out of these discussions. I don't have anything else really to add.
So two questions left. So we're going to take the first of those from Phil at KeyBanc.
Regarding North America, how is the Calvert EAF ramp going? And is that part of your incremental 2026 strategic EBITDA growth bridge as you look into next year as that comes up to the levels you expect?
Yes, we are ramping up and now expect to end the year with a run rate between 40% and 50%. This is progressing well. We have also started the qualification process. Looking at our overview on Slide 10 and the 800 million, Calvert will contribute in two ways. First, we will consolidate Calvert for the full year, having begun this consolidation at the end of quarter 2. Therefore, we will see an additional contribution from the Calvert consolidation in our M&A segment. Additionally, there will be a contribution from the EAF, particularly in this environment where Calvert is also incurring tariffs on the slabs. This aspect is included in the 600 million you see attributed to projects. Calvert will thus be reflected in these two areas next year.
And as a follow-up, you mentioned in your remarks in your analyst deck that Canada is beginning to address some of the unfairly traded steel or some level of reciprocity for the U.S. tariffs. What have they done specifically? And do you think they're doing enough?
Well, as we know, we have a very large level of imports into Canada, right? So of course, they reduce the quotas for non-FTA countries. That's a good step, but it doesn't really address the problem. So we believe that Canada should be put in place a much stronger trade protection to make sure that the industry can again also regain market share vis-a-vis imports. As we know, a lot of the imports also come from the U.S., right? And there, we are hopeful, again, as we said, that Canada, U.S., Mexico, and maybe as part of the USMCA negotiations, they will also come to an agreement. And that would be very, very good, right, if you have the whole USMCA with similar rules, similar protection. So that would be extremely positive. And you would expect if you have a common trade block that the rules would be similar.
So we'll take our final question, and we'll take that from Boris at Kepler Cheuvreux.
Two questions and one technical precision. The first is on Europe. I think you're quite close with politics in talks about those trade barriers to be implemented. What is your take on the fact that those proposals of the European Commission will be adopted in the current state they have been proposed or whether there could be some dilution? That would be my first question. Then on China, there is a lot of talks about the anti-involution measures. Do you see any chance that China might be moving towards a cut in production as some headlines were referring earlier this year? And lastly, just to confirm what you said earlier on the market share in Europe, is it 30% or 20% to 30%?
Okay. So Boris, I'll address your first question and then comment on China. There is a process regarding the dilution risk. The proposal is currently being reviewed by parliament and the council, and several governments and the commission have expressed a desire for an expedited approval process. This can only happen if there are no significant changes. Therefore, our request is to implement these measures as quickly as possible. As for the market, I am just providing a reference. Daniel, would you like to discuss China?
Yes, we frequently get questions on our calls regarding China's excess capacity, when they will address it, and when they will take steps to reform the industry to align domestic capacity with demand, aiming to restore the industry's health and profitability. There have been numerous headlines suggesting that steel might benefit from the anti-involution trend in China this year. However, we have not observed any changes in China's impact on external markets. They continue to experience weak prices and margins, with a significant portion of the industry operating at a loss. Exports remain high, with run rates of 120 to 130 million tonnes annually. These negative domestic dynamics are affecting other regions due to these exports. So, my answer is that until we see strong evidence of change through improved prices, margins, profitability, and reduced exports, nothing substantial is changing. This highlights the urgent need for governments to implement measures that shield domestic industries from the adverse effects of China's excess capacity. Genuino mentioned the strong progress we are making in Europe and what is happening in Brazil. The best way to address this issue is by establishing the necessary protections. That's our last question, Genuino, so I will turn it back to you for any final comments.
Thank you, everyone. Before we close, let me briefly reiterate the key messages from the start of the call. First, our results continue to demonstrate structural improvements. The fact that we are posting such improved results at what we believe to be the bottom of the cycle bodes well for when conditions normalize. Secondly, our underlying business continues to generate healthy cash flows. Looking behind seasonal working capital movements shows that we continue to generate good underlying free cash flow, and this is after having invested close to $1 billion in our strategic growth projects. These projects are delivering structurally high EBITDA, and this will continue in 2026. Finally, the outlook for our business has clearly improved over the past 3 months. The newly proposed trade tool, combined with an effective CBAM provides the foundation for our new business to earn its cost of capital. Together with the actions being taken in other regions like Brazil and Canada, this continues to point towards a more regionalized and better protected steel industry in which ArcelorMittal can thrive. With that, I will close today's call. And if you need anything further, please do reach out to Daniel and his team. I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you very much.