Shift in Global Steel Demand: Impact on ArcelorMittal
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Case Code: ECON084 Case Length: 10 Pages Period: 2017-2020 Pub Date: 2020 Teaching Note: Available |
Price: Rs.250 Organization : ArcelorMittal Industry : Metals & Mining Countries : India Themes: Micro Economics |
Abstract Case Intro 1 Excerpts
Excerpts
Background
Mittal Steel Company was formed in 1978 as Ispat International N.V., the international arm of the Indian steel making company JSW Ispat Steel Limited. JSW Ispat Steel was founded by Mohanlal Mittal, father of Mittal and was owned by his family. In 1989, Mittal acquired a beleaguered state-owned Iron & Steel Company in Trinidad and Tobago, which was losing huge sums of money. A year later, the facility had doubled its output and become profitable. Mittal used a similar formula in a series of acquisitions across the world – taking over weak companies (mostly state-run) and reorganizing them with the help of special management teams. In 2004, Mittal merged his companies such as Ispat International and Lakshmi Niwas Mittal (LNM) Holdings, and acquired Ohio-based International Steel Group (ISG)...
A Tough Period
The steel industry is often viewed as an important benchmark for global growth since it contributes significantly toward construction and manufacturing. Global apparent steel consumption (ASC) saw around 2.8% year-on-year growth in 2018 due to strong Chinese demand (about 3.5%), driven by the strength of machinery output and a better than expected real estate market. However, steel consumption growth slowed in most economies in 2018 due to increased trade frictions and a weakening global economy. In the first 10 months of 2018 (y-o-y), global steel exports continued to decline, including exports from India (-29.3%), the US (-13.4%), China (-9.3%), the European Union (-6.4%), and Japan (- 3.1%)....
Looking Ahead
Notwithstanding the challenging market environment, ArcelorMittal ended the year 2019 with a gross debt of US$14.3 billion and net debt of US$9.3 billion, its lowest levels since the 2006 merger. One of the biggest achievements in 2019 was the company's completion of the Essar Steel acquisition deal. In December 2019, ArcelorMittal completed a US$6 billion takeover of Essar Steel in a joint venture with Nippon Steel Corporation in which Nippon Steel owned 40% and ArcelorMittal 60%. Mittal called the joint venture ArcelorMittal Nippon Steel India (AM/NS India), a company that would own and operate ESIL. "It is very satisfying to expand our global footprint by securing a significant presence in the Indian steel market," Mittal said.....
Exhibits
Exhibit I: Annual Crude Steel Production (In Million Metric Tons)
Exhibit II: ArcelorMittal's Financial Highlights (on the basis of IFRS*)
Exhibit III: The World's Largest Crude Steel Producers in 2018 by Production Volume
Exhibit IV: Apparent Steel Consumption in 2019 (Y/Y Change)
Exhibit V:ArcelorMittal's Forecasts vs. Reality
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