“In our industry today only a strong company with a global reach can ensure long-term employment and provide acceptable returns for shareholders.” – Lakshmi Narayan Mittal
Table of Contents

1. How has Mittal managed to expand from a marginal position to become the largest steel producer in the world? 1 2. Compare Mittal’s economics per ton of crude steel with its competitors. 2 3. What threats does Mittal face? 3 4. To what extent is profitability driven by global scale? What else is relevant? 5 5. Is vertical integration a value driver for Mittal? Why? 6 6. How would a merger of Arcelor with Mittal add value? 8 Appendix I 10

1. How has Mittal managed to expand from a marginal position to become the largest steel producer in the world?

Mittal Steel advanced from being a marginal company to become one of the largest steel producers in the world through its early investment in new steel making technology and strategic mergers and acquisitions. In the 1970s, 45% of the steel market was comprised of mini-mills which used scrap metal in production (p 3). Scrap metal was inexpensive but lower quality compared to other forms of production which made it difficult for mini-mills to cater to the demands of the most high-end but demanding customer in the steel industry, the automotive industry (p 3). Direct Reduced Iron (DRI) produces a substitute at minimal cost but without the quality issues associated with scrap (p 3). Lakshmi Narayan Mittal (लक्ष्मी मित्तल, LNM) focused many mergers and acquisitions on plants that were already using DRI (p 5). Over time, DRI became a less expensive and reliable input product for the steel industry and by investing early LNM was able to become the industry lead in the use of DRI (p 5).
The acquisitions that were central to Mittal’s business model also contributed to company growth. LNM focused many of