T HE DABROWA GORNICZA STEEL PLANT NEAR KATOWICE, POLAND, IS A CATHEDRAL OF SOVIET-ERA RUST BELT INDUSTRY. AN ENORMOUS BUILDING, LIT BY SKYLIGHTS AND NAVIGATED BY CATWALKS, HOUSES A HOT ROLLING MILL MORE THAN HALF A MILE LONG.
The heart of the operation is a giant conveyor belt that trundles steel bars, glowing bright orange with heat... Sparks fly and steam rises when the bars hit rollers that squeeze the metal into I-beams and rails.
This part of the world is littered with dinosaur steel plants like Dabrowa. Such Communist relics looked doomed to extinction not long ago, but under all that corroded metal, Lakshmi N. Mittal spied gold.
The Indian-born steel baron has been building his own Jurassic Park, picking up five plants in Poland and the Czech Republic in just two years, to add to a large collection spanning four continents.
TOP OF THE HEAP
NOBODY OUTSIDE THE STEEL INDUSTRY paid much attention to Mittal’s sad sack of properties until October, 2004. That’s when Mittal Steel announced a $4.5 billion deal to buy International Steel Group (IsG), a large package of five once-bankrupt steel companies assembled by U.S. workout specialist Wilbur L. Ross Jr.
The share price of Ispat International, a publicly traded Mittal company, jumped 27% on the news. Ispat will be merged with Mittal’s privately held LNM Holdings, to form Mittal Steel Co., which will take over ISG. Assuming the transaction is finalized on schedule in early 2005, Mittal will stand at the helm of the WORLD’S NO.1 STEEL COMPANY, with annual shipments of 52 million metric tons, some $32 billion in annual sales, and 2004 proforma profits in excess of $6.8 billion.
Guy Dollé, the chief executive of Luxembourg-based Arcelor, dashed off a congratulatory e-mail as soon as he got wind of the deal—a magnanimous gesture considering Mittal had just deposed him as steel king. “Mittal has had a vision for the industry that goes back a long way, well before the majority of his peers,” says Dollé.
THAT VISION, IN ONE WORD, IS CONSOLIDATION. The word steel connotes strength and permanence, but for decades the industry has been greatly fragmented, financially weak, and plagued by oversupply. Coal and iron ore producers and customers such as car-makers were far stronger than steel-makers, and dictated terms. Not surprisingly, each downturn sent waves of companies to the wall.
Many steel execs thought Mittal was deluded as they watched him snap up mostly distressed mills from Trinidad to Kazakhstan. But through the years, Mittal just patiently perfected his techniques of reviving plants by making quick capital injections, dispatching emergency teams of managers to stabilize factories, and exploiting the efficiencies in purchasing and expertise that come with an expanding network of mills . The global market has favored Mittal, too.
A doubling of steel prices in the last year, thanks to a strong world economy and insatiable demand from China, is now making him look like a genius.
Still, it took the ISG deal to truly vindicate Mitral’s vision. “We need much larger companies, healthier companies. They will bring sustain-ability to the industry,” says the soft-spoken steel mogul in his modest offices on London’s Berkeley Square. “What I am hoping is for consolidation to continue.” There’s certainly room for more: Even after acquiring ISG, Mittal will have just 5% of the 1 billion metric ton world market for steel.
Questions linger about the long-term viability of his strategy, which depends on success in the U.S. and on the group’s ability to thrive even in a downturn. What’s more, Mittal will have to spend about $3 billion over the next five years to upgrade and maintain all those aging plants. Yet the massive deal is a triumph for Mittal, who has come a long way since his birth in the Sadulpur district of India’s Rajasthan state in 1950. His father started a steel business in Calcutta decades ago. But after setting up his own Indian minimill in 1971, the eldest son struck out on his own, opening up a mill in Indonesia in 1975 . On that tiny foundation, Mittal has built an empire spanning 14 countries.
With the news of the ISG deal, Mittal’s net worth has soared to around $22 billion. The steel magnate is already a British tabloid staple. Mittal is said to have paid $130 million for a mansion in London’s West End and to have spent millions on the nuptials of his only daughter—a six-day affair, including a giant bash at Versailles.
Now, Mittal is ready to make his name in the U.S. Ispat already has a presence stateside through its $1.2 billion acquisition of Inland Steel Co. in 1998.
December 20, 2004 (pg. 50)
Church of the Science of God
La Jolla, California 92038-3131
© Church of the Science of GOD, 1993