2012 has been a tortuous year for investors hoping for a steel rebound. While valuations across the sector have looked low, companies struggled to make price hikes stick and the slowdowns in Europe and China have led to widespread worries about demand. All of that said, ArcelorMittal (NYSE:MT) is now trading close to its 2008 troughs, but without the same debt and inventory worries that attended that low. Constant disappointment has blunted the virtues of making any sort of value call in the steel sector, but patient investors may want to look at ArcelorMittal as a long-range value turnaround.

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Diversification and Integration Do Not Matter Today
In a normal environment, ArcelorMittal is a pretty impressive steel company. Not only does ArcelorMittal account for about 8% of the world's steel capacity, but it has about 20% of the global automotive steel business as well as sizable positions in growing emerging market economies like Brazil and India.

ArcelorMittal has also been careful to lock in many of its critical supplies. ArcelorMittal meets over half of its iron ore needs from its own mines, reducing its reliance on companies like Vale (Nasdaq:VALE) or Rio Tinto (NYSE:RIO). The company also controls about 20% of its met coal needs. This advantaged access to materials is certainly a positive when healthy steel demand pushes up spot prices, but it does the company little good when steel demand and pricing are soft.

SEE: Understanding Supply-Side Economics

A Tough, but Not Disastrous Market
With global economic growth apparently back on "pause," steel prices have gone nowhere fast. In fact, steel (hot roll coil) prices are about 20% lower this quarter in the U.S. and Europe versus last year, and about 10% lower in China, and pretty close to flat with 2010 levels. What's worse, it's not as though companies like ArcelorMittal are making up for it with volume.

Overall, it could be a lot worse. While sell-side estimates continue to erode, certainly not helped by recent warnings from Nucor (NYSE:NUE) and Steel Dynamics (Nasdaq:STLD), the company is still profitable. What's more, the punishing inventory problems of the last trough aren't a problem this time, suggesting that there will be no need for major capacity shutdowns.

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Balancing Risk and Opportunities
Between 2008 and 2009, ArcelorMittal's balance sheet was a major worry, but investors seem relatively more comfortable with the company's debt now. I do wonder, though, if the company wouldn't like to take advantage of the currently terrible coal market and try to acquire some more met coal assets. At current market prices, ArcelorMittal could likely get quite a bit of bang for its buck, but the lack of balance sheet liquidity and flexibility may make that idea a non-starter.

There are also some risks to the company's emerging market-heavy growth plans. ArcelorMittal has wanted to expand its operations in India for some time now, but bureaucratic hassles in India are holding that up in a big way (and South Korean steel giant POSCO (NYSE:PKX) has run into the same difficulties). Elsewhere, there is still the risk of Chinese overproduction (to stimulate export growth) and a weakening economy in Brazil (where ArcelorMittal has leading share).

SEE: 4 Misconceptions that Sink Emerging Market Investors

The Bottom Line
Asking "how can things get any worse?" in a given commodity market is usually an invitation to find out just how bad things can really get. Therefore, I cannot bring myself to say that the steel market cannot get worse. Prices are 20% lower than a year ago, but they're roughly 65% higher than the lows of the past five years.

I do believe that ArcelorMittal is a value in the making, however. This is a well-run steel company that is well positioned to take advantage of ongoing construction demand in emerging markets. The worry, though, is that the emerging economies have built all the infrastructure they need (or can afford) for the next decade and that commodity demand is going to fall apart.

That's a risk for sure, as is the ongoing substitution of steel with other metals like aluminum. Nevertheless, ArcelorMittal is trading near past cyclical lows, despite being in better shape than in prior lows. ArcelorMittal isn't a get-rich-quick idea, but patient investors may want to give some attention and due diligence to this name.

At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.