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Greenfield projects not viable, Mittal says

Jun 17, 2014 | 01:33 PM | Michael Cowden

Tags  ArcelorMittal, Lakshmi Mittal, Valin ArcelorMittal Automotive Steel, Vama, AM/NS, greenfield, M&A, China Mexico


NEW YORK — ArcelorMittal SA won’t pursue greenfield projects or significant merger-and-acquisition activity, given the glut of steel capacity worldwide, the company’s top executive said.

"Greenfield projects are not viable. So I remain of the view that greenfield projects ... are not a way of growing the business," ArcelorMittal chairman and chief executive officer Lakshmi N. Mittal said June 17 during a highlight presentation at AMM’s Steel Success Strategies XXIX conference in New York.

Previous speakers had suggested that the United States might have room for several new steel plants.

The Luxembourg-based steelmaker, the world’s largest, is instead focused on using its existing capacities most effectively, Mittal said. "We are not in the mode of acquiring companies. That is not our business plan," he said. "Our business strategy at this time is to create value for our shareholders—so really M&A is not our strategy."

ArcelorMittal’s acquisition of Essen, Germany-based ThyssenKrupp AG’s former facility in Calvert, Ala., broke from that general strategy, Mittal said. However, that deal was a good opportunity for ArcelorMittal because the facility is among the most advanced downstream plants in the world and is well positioned to supply Mexico’s fast-growing automotive market, he said.

ArcelorMittal and Tokyo-based Nippon Steel & Sumitomo Metal Corp. acquired the facility in February for $1.55 billion and renamed it AM/NS Calvert (amm.com, Feb. 28).

Valin ArcelorMittal Automotive Steel Co. Ltd. (Vama), which started operations in Hunan province’s Loudi city June 15 (amm.com, June 16), also offers ArcelorMittal the opportunity to supply high-end, high-strength steels to other fast-growing sectors such as China’s automotive and white goods markets, Mittal said. Vama also represents a further push by the steelmaker to offer global steel solutions to global customers, he added.

"The auto sector operates global platforms. This means they increasingly make cars exactly the same way in China as they do in the United States," Mittal said. "Being able to work with the same supplier in different markets is therefore clearly an advantage, as they are guaranteed exactly the same products produced to exactly the same quality standards."

Facilities such as AM/NS and Vama represent the benefits of consolidation combined with innovation, Mittal said. However, he also stressed that ArcelorMittal would choose carefully as it mulls further expansions, especially in China.

"China’s steel demand is slowing down," Mittal said, noting that the country’s steel demand is expected to increase 3 percent this year compared with 7 percent in 2013. But while China’s residential construction demand is down, other markets—such as automotive—are expected to rise more than 8 percent, with strong growth also expected for white goods, infrastructure and railways, he said.

However, while ArcelorMittal might be slowing its efforts to consolidate steel production, the service center sector needs further consolidation, Mittal suggested on the sidelines of the conference. "They have to consolidate or they cannot survive ... unless they change their business model and create more value," he said. "They should have a closer interface with the manufacturers ... and customers."




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