Mit­tal’s sim­ple strat­egy is to lock in raw ma­te­rial sup­ply

The Weekend Australian - Review - - Steel -

L AKSHMI Mit­tal has been com­pared to Andrew Carnegie, the Scot­tish- born Amer­i­can in­dus­tri­al­ist, busi­ness­man and phi­lan­thropist — to Mit­tal’s ad­van­tage. The man who runs the world’s largest steel­maker, Lux­em­bourg- based ArcelorMit­tal, is the world’s fifth rich­est man.

Last year, in com­pil­ing its Top 100 rich list, Time mag­a­zine ar­gued there were par­al­lels be­tween the In­dian busi­ness­man and the fel­low who, 106 years ear­lier, had founded US Steel.

Both were ac­coun­tants whose vi­sion greatly ex­ceeded that craft. Both over­came fierce op­po­si­tion, and both leaped im­pos­si­bly high hur­dles to reach goals that bog­gled their con­tem­po­raries’ minds,’’ the mag­a­zine wrote. But there the sto­ries part. Carnegie re­garded wealth as a trust and spent much of his for­tune on phi­lan­thropy ( in­clud­ing build­ing more than 2500 li­braries). Mit­tal has be­come bet­ter known for his $ US128 mil­lion man­sion in Lon­don and spend­ing a re­puted $ US50 mil­lion on his daugh­ter’s wed­ding, which in­cluded use of the Palace of Ver­sailles.

ArcelorMit­tal, though, does pro­mote its phil­an­thropic side — al­though still mod­est by Carnegie’s stan­dards. It is help­ing re­vive women’s hockey in In­dia, it gave $ US150,000 to the Chi­nese earth­quake re­lief ( as well as of­fer­ing to de­sign an earth­quake- re­sis­tant school build­ing) and 100,000 euros to the Burma re­lief ef­fort.)

US Steel was the first com­pany to ex­ceed $ US1 bil­lion in mar­ket cap­i­tal­i­sa­tion. ArcelorMit­tal is close to 140 times that in worth. His fam­ily owns 45 per cent of the gi­ant com­pany, a stake es­ti­mated to be worth about $ US60 bil­lion.

His Mit­tal op­er­a­tion won con­trol of Europe’s Arcelor in 2006 and now has op­er­a­tions in more than 60 coun­tries and 320,000 em­ploy­ees — and is grow­ing apace with plans to move into Liberia and Bul­garia and ex­pand its mar­ket share in the coun­tries of the for­mer Soviet Union. And those are just a few of its present am­bi­tions.

In to­tal those am­bi­tions amount to just one, sim­ple ob­jec­tive: lock up the sources of its vi­tal raw ma­te­ri­als — iron ore and cok­ing coal.

So now the com­pany is a player in Aus­tralia for that very rea­son. In May, ArcelorMit­tal bought a 14.9 per cent stake in Queens­land miner Macarthur Coal, and there has been spec­u­la­tion that the Lux­em­bourg com­pany could even­tu­ally stage a full takeover.

It has also ac­quired 16 per cent of Aus­tralian- listed Coal of Africa and an off- take agree­ment for out­put from that com­pany’s South African min­ing op­er­a­tions.

The size of the com­pany now can be gauged from its most re­cent quar­terly per­for­mance re­ported last month. Earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion to­talled $ US5.04 bil­lion for the four months. Sales came in at just un­der $ US30 bil­lion. ArcelorMit­tal is now three times the size of the next big­gest steel maker.

The orig­i­nal Mit­tal com­pany, even though con­trolled by an In­dian fam­ily, has its roots else­where. The slow but re­lent­less growth be­gan in 1989 with the ac­qui­si­tion of the Iron & Steel Co of Trinidad and Tobago. Three years later it snared the ail­ing Sibalsa steel mill in Mex­ico for $ US220 mil­lion.

Then came Sid­bec- Dosco, Canada’s fourth largest steel pro­ducer, Ham­burger Stahlw­erke, Chicagob­ased In­land Steel, Italy’s Unimetal, Al­ge­ria’s Al­fasid, Nova Hit in the Czech Repub­lic, Poland’s Pol­ski Huly Staly and oth­ers.

And there is no sign of it stop­ping. The com­pany is try­ing to gain con­trol of the trou­bled Bul­gar­ian steel com­pany Kremikovtzi, has en­tered a joint ven­ture with a Turk­ish steel dis­trib­u­tor, is — at last — turn­ing its at­ten­tion to In­dia with a new 12 mil­lion- tonne- a- year steel mill in Orissa. More­over, ArcelorMit­tal has in­vested in two In­dian coal mines to gain sup­plies for its two planned 750 megawatt power plants, which will en­sure elec­tric­ity for the steel mak­ing.

Last De­cem­ber ArcelorMit­tal won ap­proval to take con­trol of Acin­dar In­dus­tria Ar­gentina de Aceros and has also bought full own­er­ship of two Costa Ri­can steel com­pa­nies. In In­done­sia, there was the move to buy a stake in sta­te­owned PT Krakatau Steel and set up a ven­ture with PT Aneka Tam­bang, In­done­sia’s sec­ond­largest nickel pro­ducer.

Mit­tal doesn’t get ev­ery­thing he wants. China’s sec­ond- largest steel maker, An­gang Steel, turned down an of­fer from ArcelorMit­tal seek­ing a 25 per cent stake.

And now there is also Liberia. The com­pany’s latest am­bi­tion is to re­open the old iron ore mine op­er­ated in Liberia un­til civil war led to its clo­sure in 1989. The at­trac­tion is a strate­gi­cally placed mine ca­pa­ble of sup­ply­ing the com­pany’s Euro­pean and North Amer­i­can steel mills. How­ever, it will not in­volve just re­build­ing a mine; all the roads, rail­way lines and other in­fra­struc­ture that were once part of the op­er­a­tion have been dam­aged or de­stroyed.

Mozam­bique and Brazil are also high on ArcelorMit­tal’s pri­or­ity list.

All this and more is part of the drive to build the com­pany’s yearly steel pro­duc­tion from the present 120 mil­lion tonnes to 200 mil­lion tonnes.

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