ArcelorMittal (MT) Q2 2026 earnings review
Europe Trade Protections Fuel Margin Recovery Despite Cash Flow Drag
ArcelorMittal delivered a resilient Q2, with EBITDA rising 23% sequentially to $2.1B and EBITDA margins expanding to 12.3% ($155/t). The long-awaited European trade protections (CBAM and TRQ) are finally bearing fruit, with European EBITDA surging 39% QoQ and the company bucking typical Q3 seasonality by guiding for stable-to-higher shipments. However, beneath the strong top-line numbers, cash generation is a glaring weak spot. A massive $2B working capital build in 1H drove free cash flow deep into the red (-$1.5B) and pushed net debt up to $9.5B. While management promises an H2 working capital unwind, the pressure is on to convert structurally improved margins into actual cash.
🐂 Bull Case
The new TRQ trade tool and CBAM are successfully isolating the European market from dumped imports. ArcelorMittal is capitalizing by restarting idled blast furnaces in Spain, Poland, and France to capture domestic market share.
Armed with proceeds from the Vallourec stake sale, management pledged to exceed the minimum policy payout of 50% post-dividend FCF, accelerating a buyback program that has already retired 38% of shares since 2020.
🐻 Bear Case
Net debt crept up to $9.5B (from $7.9B at year-end) driven by a $1.98B working capital drain in 1H. If the promised H2 inventory unwind falters, the aggressive buyback narrative could face scrutiny.
Despite strong group results, the Mining segment collapsed. EBITDA fell 40% sequentially to $179M as heavy rainfall in Liberia and port constraints in Canada severely constrained shipments.
⚖️ Verdict: 🟢
Bullish. The successful implementation of European trade barriers proves management's thesis that the region can return to earning its cost of capital. While the working capital drag is frustrating, the $28/t sequential margin improvement in Europe and accelerating buybacks create a compelling value proposition.
Key Themes
Europe Segment Leads the Rebound
Accelerating. The European business is gathering serious momentum. Driven by the new Tariff Rate Quota (TRQ) implemented on July 1, Q2 EBITDA surged 39.3% sequentially to $697M. EBITDA per tonne improved by $28/t. The company is actively restarting idled capacity (Asturias, Dabrowa, and Fos blast furnaces) to capture returning domestic demand, signaling high confidence in the sustainability of this structural reset.
North America Recovers from Operational Outages
Accelerating. North American operations bounced back aggressively as the Mexico long products facility fully recovered from its late-January restart. Q2 Sales rose 11.3% sequentially to $3.67B, and EBITDA jumped 27.4% to $488M. The positive price-cost effect and a 7.9% increase in shipments demonstrate that the segment has moved past its recent operational bottlenecks.
Strategic Growth Projects Adding Firepower
Stable. The company reiterated its guidance that its portfolio of organic growth and M&A will add $1.8B in incremental EBITDA from 2026 onwards. Key projects like the AMNS Calvert NOES facility and the India renewable energy ventures are advancing, pivoting the company's mix toward higher-margin, specialized assets.
Mining Segment Stumbles on Logistics and Weather
Decelerating. Contradicting the positive narrative of optimized assets across the broader business, the Mining segment was a glaring weak spot. EBITDA cratered 40% sequentially from $299M to $179M. While iron ore production reached 10.1Mt, shipments lagged at 9.4Mt. Management blamed this 0.7Mt shortfall on heavy rainfall in Liberia and weather-related constraints at ArcelorMittal Mines Canada (AMMC) ports, which directly hit the bottom line via lower volumes and higher freight costs.
Cash Flow Eaten by Working Capital Build
Decelerating. A massive $1.98B working capital investment in 1H 2026 dragged free cash flow down to negative $1.49B, driving net debt up to $9.5B. While management attributes this to a seasonal $1.5B build in Q1 and a further $0.5B in Q2, the sheer size of the cash drain limits flexibility. Investors will demand to see this reverse into massive cash generation in H2.
Macro: The Import Rush Overhang
Management previously acknowledged that Q2 imports into Europe would be highly elevated as buyers rushed to bring in material before the July 1 TRQ deadline. While ArcelorMittal is confident this inventory overhang will normalize quickly, it presents a short-term pricing and volume risk if European end-demand weakens before the excess material is absorbed.
Innovation: Expanding Non-Grain Oriented Electrical Steel (NOES)
ArcelorMittal is aggressively targeting the EV supply chain. The company highlighted ongoing construction of advanced manufacturing facilities for NOES in Mardyck (France) and AM Calvert (US). These assets directly tie the company's future to the electrification megatrend, pivoting away from commoditized flat steel toward specialized, high-premium products.
Other KPIs
Accelerating. A 31.5% sequential jump from $195M in Q1. Driven by a positive price-cost effect and higher average selling prices, confirming the resilience of the Indian market and validating the company's aggressive capacity expansion strategy in the region.
Accelerating. Up 20% from $334M in Q1. Benefited from an 8.0% increase in average selling prices, partly due to a 4% appreciation of the Brazilian Real, and a 3.9% increase in shipments into a protected domestic market.
Guidance
Accelerating vs historical trend. Typically, Q3 sees a high-single-digit seasonal decline due to summer holidays. Guiding for stable-to-higher volumes reflects immense confidence in the new TRQ trade tool diverting orders back to domestic producers.
Accelerating. Across all segments, management expects volume growth in the back half of the year, signaling that destocking is finished and market share capture is underway.
Stable. The guidance remains unchanged, including $1.7B - $1.9B of strategic capex directed toward decarbonization and high-return EAF/NOES projects.
Key Questions
Mining Logistics Fix
With shipments severely impacted by port constraints in Canada and rainfall in Liberia during Q2, what concrete logistics or infrastructure adjustments have been made to guarantee the 18Mt full-year shipment guidance for Liberia?
Working Capital Unwind
Net debt has risen to $9.5B largely due to a $2B working capital build in 1H. Given the expectation of higher shipments in H2, how much of this working capital can realistically be released by year-end without choking off the volume ramp-up?
TRQ Circumvention Risks
Now that the TRQ is live, are you seeing any early signs of trade diversion or circumvention through semi-finished products (like Russian slabs) that fall outside the immediate scope of the new rules?