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Arcelor

It's the revenge of Europe's Rust Belt. Steel used to be one of the least profitable industries, but now the sector is throwing off sparkling earnings and humming with deals.

Arcelor, Europe's top steelmaker, saw profits jump 800% in 2004, to €2.3 billion, on a 16% increase in sales, to €30.2 billion. Demand rose 5.1% as customers, anticipating higher prices due to China's appetite for steel, built inventories. The first quarter of 2005 continued to sizzle, with operating profits up 143%, to €1.7 billion, on sales of €8.1 billion. Chief Executive Guy Dollé predicts "the third quarter will be tough" as customers reduce inventories. But he still thinks overall 2005 results will beat 2004.

Arcelor was created by the 2002 merger of France's Usinor, Luxembourg's Arbed, and Spain's Aceralia. With up to 35% of the European market, regulators won't let Dollé grow at home. So Arcelor recently completed its takeover of Brazil's Companhia Siderúrgica de Tubarão, making it leader in Latin America. Dollé is also bidding on Turkey's state-owned Erdemir, which can supply both local customers and fast-growing Eastern European markets. Meanwhile, Dollé is cutting production by 1.5 million metric tons as demand cools. He hopes that in downturns to come the industry will choose output cuts over price wars.