Mittal Consolidation

The stage seems set for further consolidation of the steel market with the announcement that the two largest companies are merging, following the five month acquisition attempt of Lakshmi Mittal’s Mittal steel finally meeting the approval of Arcelor‘s board of directors. Shareholders will now vote on the deal later this month.

The deal was initially rubished by the chief executive officer of Arcelor Guy Dolle who will not be joining the newly formed company Arcelor-Mittal. Arcelor also made a opaque deal to merge with Severstal in an attempt to prevent the merger with Mittal. Shareholders will also vote on the Severstal merger with likely to obtain compensation of a few hundred million dollars if their merger fails.

Image of Lakshmi Mittal taken from Mittal website
Lakshmi Mittal

On 28th June the Mittal deal won the support from the Luxembourg government, which owns 5.6% of Arcelor. The new company will have 10% of world steel production by volume, total sales of 55bn euros and more than 320,000 employees.

Both companies are the result of a myriad of mergers, Arcelor forming in 2001 by the merger of Aceraila (Spain), Usinor (France) and Arbed (Luxembourg). Arcelor recently acquired Dofasco in a bidding war with ThyssenKrupp which Lakshmi Mittal is planning to sell now to ThyssenKrupp.

Mittal Steel formed by a large number of acquisitions;

  • 1989: Acquisition of Iron & Steel Company of Trinidad & Tobago (undislosed sum)
  • 1992: Acquisition of Sibalsa in Mexico ($213m)
  • 1994: Acquisition of Sidbec-Dosco in Canada ($455m)
  • 1995: Acquisitions of Hamburger Stahlwerke ($64m), forming Ispat International Ltd. and Ispat Shipping
  • 1995: Karmet in Kazakhstan ($950m)
  • 1997: Ispat International NV goes public
  • 1997: Stahlwerk Ruhrot & Walzdraht Hochfield in Germany ($100m)
  • 1998: Acquisition of Inland Steel Company in America ($1.4bn)
  • 1999: Acquisition of Unimétal in France ($120m)
  • 2001: Acquisitions of ALFASID and Sidex Romania ($500m)
  • 2002: Business assistance agreement signed with Iscor
  • 2003: Acquisition of Nova Hut in Czech Republic ($905m)
  • 2004: Acquisitions of Polskie Huty Stali in Poland ($1.5bn)
  • 2004: BH Steel in Bosnia ($280m)
  • 2004: Macedonian facilities from Balkan Steel
  • 2004: Merger with Ispat Intl & LNM Holdings in the Netherlands ($13bn)
  • 2004: Creation of Mittal Steel and proposed acquisition of International Steel
  • 2004: Iscor (52 % stake) in South Africa
  • 2005: Acquisition of Kryvorizhstal in Ukraine ($4.8bn)
  • 2005: International Steel in America ($4.5bn)
  • 2005: Plans for New plant Jharkhand, India announced ($9 bn)
  • 2006: Merger with Arcelor announced and completed after much controversy ($18.8bn)

The top 15 steel producers manufacture 1/3 of the worlds steel.

Steel Producers ranked by tonnes of steel produced (2005/2006?)

Mittal 63 mt
Arcelor 47 mt
Nippon Steel 32 mt
JFE 30 mt
Baosteel 24 mt
US Steel 20 mt
Nucor 18 mt
Riva 18 mt
Corus 18 mt
ThyssenKrupp 17 mt
Tangshan 16 mt
Gerdau 15 mt
Evraz 14 mt
Severstal 14 mt
Others 756 mt

Market analysts are now discussing further mergers, for example Evraz (41% owned by Russian oligarchs Roman Abramovich) and Corus are rumoured to be discussing a merger, however these claims have been by Evraz strategist Andrei Teterkin.

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5 Responses

  1. Mr Mittal in an interview with a local Indian newspaper has hinted about the interests of Arcelor-Mittal in China and India. Both the firms, before their “love marriage”, had been eyeing at the emerging markets in these countries. He confirmed that the plans to expand business in this part of the globe remain.

    Mr Mittal also discussed the building of a 12mt/yr steel making facility in India. This move of the newly formed steel giant would definitely help India to boost the steel production capacity. But the question still looming, is how to enhance the demand in the domestic market?

    Tata Steel, the most prominent private player in the indian steel market, also came up in the discussion. Mr Mittal sounded ecstatic about the friendly ties that Arcelor had been sharing with Tata Steel, before entering into wedlock with Mittal. He hopes to develop an even stronger relationship with the indian steel behemoth in days to come.

  2. It would be great if the growth of Mittal-Arcelor continued with the acquisition of CORUS and TATA Steel. Mittal is a terrific businessman and I am sure this is the right direction to go in.

  3. I think it would be nice to acquire all the major steel companies, but in alphabetical order. Mittal has said he will focus on the Chinese and Indian Markets, so it is logical to try to acquire Baosteel next, then Corus, Evraz, etc. This is why he said that TATA steel don’t need to worry.

  4. I can not agree with Harry’s opinion. It is also important to have more Steel companies in the world other than the Mittal’s to have a proper sense of competition and to avoid monopoly. Like in any modern society, it is important to have a mixture of cultures in the industry too, to achieve proper growth with added value.

    It is highly satisfying to notice Mr. Mittal’s recent comment on this issue, which says that in India they are not interested in any acquisition but only in green-field projects.

  5. Yesterday Tata Steel announced that they were “considering” bidding to buy Corus, amongst other options. In this way, Corus can be turned into a more efficient steel producer. The acquisition will help Tata Steel to quadraple its capacity over night.

    With the news, the share prices of both Corus and Tata Steel rose significantly. Like the other industry watchers, I also feel, it would be a highly successful event in the industry. I am certainly looking foward to it eagerly!

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