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