Jim Armitage: An iron will is needed to back the steel makers

Outlook Warren Buffett advises investors to be fearful when others are greedy, and greedy when others are fearful. It's stood him in good stead – the $5bn (£3bn) he spent bailing out Goldman Sachs during the terror of the financial crisis in 2008 is set to bank him a $2bn profit.

In the case of ArcelorMittal, some investors have clearly been acting on his mantra. Despite a recent dip, its shares have gained 17 per cent in the past six months. But it must have taken some serious greed to overcome the fear. The "risks" section of its annual report out yesterday neatly collates some pretty scary facts about the global steel market.

Try this: European steel-producing capacity outstrips demand by 40 per cent. Demand from European industrialists is nearly a third below the 2007 peak. China has built so many steel mills in recent years that, having been importing for decades, it now finds itself also producing way more than it needs. That means it has become a hefty exporter of steel, driving global prices even lower.

It's not just demand for the stuff that's terrifying, but the cost of making it too. Steel's raw materials – iron ore, coke and the like – bounce around insanely. Iron ore went from $160 a tonne last February to $110 in May. It then bounced back up 30 per cent before plunging again to below $120 today. Pity the folks attempting to make a business plan around that mess.

Last but not least, look at the places where the big steel operators work. Boomtowns currently include the imploding Ukraine and, to quote ArcelorMittal, states in Mexico where "acute drug-related violence (including executions and kidnappings of non-gang civilians) occurs and the largest drug cartels operate".

Hopefully emperor Lakshmi Mittal takes with him an army of security guards when he heads to those Mexican badlands to walk the factory floor. It's notable the company has no key-man life insurance for him should the worst happen.

This kind of backdrop may make for exciting plotlines for Breaking Bad, but for all but the bravest investor, the steel world must be stretching tolerance for fear too far.