Indra’s Drishtikona (Viewpoint)

Big, bigger, biggest, and then

Posted : October 30, 2004 at 6:28 pm [IST]

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LN Mittal is a living example of karma yogi. Even in area such as steel, he has become the biggest manufacturer of the world. What a great success is this? This is something that every Indian can feel proud of.

As one pink newspaper reports- “It’s a neat three-in-one for steelmaker extraordinaire Lakshmi Mittal. In one fell swoop he has become the globe’s biggest steelmaker - an Andrew Carnegie for the 21st century. Simultaneously, he also becomes the richest man in Britain and the wealthiest Indian on the planet. His fortune is now reckoned to be worth around £12 billion ($22 billion).”
Mittal Steel Company, a $31 billion (over Rs 140,000 crore) steel behemoth, the largest steel company in the world will be born through merger of LNM Holdings with Ispat International and subsequent acquisition of International Steel Group (ISG).

Mittal now makes 70 million tonnes of steel, whereas Arcelor, the industry leader till last week, makes about 44 million tones and the total production of a country like India is only about 33 million tones,

It all started in 1976, when his father left India more specifically Kolkata and started a steel company in Indonesia. LN inherited the international steel business of his father after partition. In1989, he bought a failing plant in Trinidad & Tobago. During the early 1990s Mittal again elbowed out the competition and scooped up a state-run Mexican mill that had plunged into heavy losses. The plant became the group’s money-spinner throughout the decade. Then, in 1995, he startled the steel industry by going for a decrepit plant in Karmet, Khazakhstan, which most global companies refused to touch with a bargepole. Many concluded that Mittal had blundered, but they failed to realise its strategic location -only a few hundred miles from the Chinese border and that China was to be the largest consumer dictating the fortunes of the steel industry. By 2000, the LNM Group produced about 16 million tonnes of steel. During the next few years, Mittal bought many of the steel mills in places like Poland, the Czech Republic and Romania and is today able to sell at preferential rates to Western Europe. In North America, he has five plants in the US, one in Mexico, another in Canada and one in Trinidad & Tobago. Mittal now controls about one-tenth of the world’s steel production.

This 54-year Marwari was born in a village in Rajasthan on June 15, 1950 and studied commerce at Kolkata-based St. Xavier’s College.

His abilities of identification, acquisition and turnaround of steel assets have been great and something to be envied by the competition.. His two major strategies were : a shift from traditional blast furnaces to more efficient mini-mills and large scale use of direct reduced iron (DRI) as raw material. Main idea was to produce the steel at minimal cost.

The share of mini-mills’ in world output is constantly increasing. Mittal could foresee the thing that was to come in advance. Simultaneously, LNM group invested considerably in a substitute for scrap DRI. The cost of DRI is significantly lower than the high-quality scrap used by mini-mills and the pig-iron used for making steel in blast furnaces.
Surprisingly, relied on knowledge and commitment of Indian technocrats and they never failed him.

His new Mittal Steel will encompass all aspects of modern steel making to produce a comprehensive portfolio of both flat and long steel products and will serve all the major steel consuming sectors, including the automotive, appliance, machinery and construction sectors.

The company will have a vast infrastructure to sustain its growth. The Group has a fleet of five modern Panamex vessels and three US Flag Lakers. In addition to iron ore mines in the US and Mexico, Ispat Karmet Coal’s captive mines have metallurgical grade coal reserves of 1.7 billion tons.

“Mittal Steel will have proforma revenues in 2004 of $30 billion and an annual production capacity of 70 million tonnes. It will have operations in 14 countries and employ 165,000 people. The group will have up to $1.3 billion in capital expenditure in the current year.”

Is it not a great success story for all the Indian entrepreneurs to inspire? With a fire to achieve in heart, one can move fast to become big, then bigger, and also the biggest one. And now Mittal will have to maintain his lead as the new strategies are being taken by his competitors to go ahead.

How do we compare LN’s success with Ambani’s?
Ambanis have done the same in India. They faced the constraints of the government’s controls and then also grew. What was that they did get frustrated as the father of LN Mittal did, remained in India, faced the odds and became the biggest industrial house?

PS: On October 22,2004, I posted an entry on ‘Bachhan and Gandhi again–’, if you are interested, you can read some more on it in the latest ‘OutLook’- the news magazine. It has made it a cover story this week.

- Indra

Category: Manufacturing |