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ArcelorMittal

ArcelorMittal, the largest steelmaking company in the world, with over 326,000
employees in over 60 countries, is the leader in all steel related global products.
Automotive, construction, household appliances, and packaging are only a few of the
markets that ArcelorMittal supplies to the global population. Not only does the company
produce steel, it operates the mining of its raw materials and extensive distribution
networks. The company is fairly successful, and not just financially, it is expanding each
year and is responsible for nearly 10% of the world’s steel production. Seated in
Luxembourg, ArcelorMittal’s worldwide recognition is impressive, it is listed under the
stock exchanges of New York, Amsterdam, Paris, Brussels, Luxembourg and the Spanish
stock exchanges of Barcelona, Valencia, Madrid and Bilbao. This renown also gives
ArcelorMittal access to all key steel markets across Asia, North America, Europe and
Africa, and they are still looking to expand in both Chinese and Indian markets.
The company has an extensive history, dating back from the merger of Arcelor
and Mittal Steel in 2006 to the founding of the company Ispat, which formed Mittal Steel
with its sister-company, LNM Holdings, in 2004. Lakshmi Niwas Mittal, the CEO of
ArcelorMittal, the founder of Mittal Steel and the currently designated “richest Indian in
the world”, started working in his family’s steelmaking business in 1976, and eventually
formed his own company, which he immediately began to expand internationally.
Eventually he came to name the company Ispat International. In 1989, the Caribbean
division of Ispat formed to lease the Iron & Steel Company of Trinidad & Tobago, which
was a technologically advanced steel complex. Mittal managed to profit off of this in its
first year of production. In 1992, Mittal acquired the Mexican steel company Sibalsa, the
third largest in the country, which was then renamed Ispat Mexicana. After this, Mittal
acquired Canada’s fourth largest steel company in 1994, Sidbec-Dosco. In 1995, Mittal
bought a blast furnace steel plant in Kazakhstan, as well as Germany’s fourth largest
producer of wire rod. By 1997, Ispat International made it onto the New York and
Amsterdam stock exchanges, as well as acquiring two more German companies in the
same year. Next Ispat International acquired America’s fourth largest steelmaker in
1998, and the French company Unimétal in 1999.
LNM Holdings, another company owned by Mittal and Ispat International’s
sister-company, expands into Romania and Algeria in 2001, then South Africa in 2002,
and the Czech Republic in 2003. LNM Holdings and Ispat International announced their
merger in 2004, and together form Mittal Steel. This same year Mittal Steel announces it
is taking part in an agreed takeover of the International Steel Group of the US, acquires
rolling mills in Macedonia, and buys two more steel producers in Bosnia and Poland.
The next year for Mittal Steel was incredible, purchasing subsidiaries in Canada,
Ukraine, Libya, and China, and is integrated for the first time in Fortune Magazine’s
Fortune 500, ranking it 55th in terms of profit.
Arcelor, created in 2002 by the merger of the companies Aceralia out of Spain,
Usinor out of France, and Arbed out of Luxembourg, merged with Mittal Steel through a
hostile takeover bid by Lakshmi Mittal in 2006. The merger was described as “one of the
most sustained corporate dramas of the past decade”, lasting over 5 months and frowned
upon by many continental European politicians, especially in France. It was resolved,
however, once Mittal raised his bid by over 44 percent of what it was originally. Since
then, ArcelorMittal has flourished significantly, completing over 14 transactions in 2007
and key financials showing revenues of US$105.2 billion.
Steel is an alloy, a mixture of two or more metals, of primarily iron with small
quantities of carbon. However other elements can be used in place of carbon for the
alloying process, such as chromium, tungsten and manganese. These and carbon act as
hardening agents, preventing crystallographic defects in the iron atom crystal lattice from
slipping past one another. Varying the amount of these elements and the form of their
presence controls the steel’s hardness, ductility and tensile strength, among other
properties. The conversion of iron to steel is an oxidation process where the dislocations
of the iron atom are eradicated by a reaction with oxygen gas. The most common process
for making steel is known as the basic oxygen process. This is because the conversion
can be completed with a large amount of iron in a relatively short amount of time. This
process involves molten iron being poured into a cylindrical vessel, where pressurized
oxygen gas is then pumped inside using a water-cooled tube above the molten metal.
This environment causes metals such as manganese, phosphorus, silicon and excess
carbon to react with oxygen to form oxides. These oxides then react with the appropriate
fluxes, such as limestone, to form slag. The actual type of flux that is chosen depends on
the composition of the iron. For example, if the main impurity of the iron were to be
silicon, then a basic flux such as calcium oxide would be added to then form the slag.
Once the preferred amount of carbon and other impurities has been reached, the container
is rotated so that it is now in a horizontal position rather than vertical, so that the molten
steel can be removed from the container and the slag. After this comes the heat treatment
of the steel, which further determines what its properties are going to be like, and finishes
the steelmaking process. There are 3 general types of steel that are produced in the world
today. These are carbon steel, alloy steel, and stainless steel.
Carbon steel’s main alloying constituent is carbon, and no minimum content is
specified or required for chromium, cobalt, columbium, molybdenum, nickel, titanium,
tungsten, vanadium or zirconium, which are all elements that would be added to obtain an
alloying effect. Carbon steels, as a group, are unquestionably the most commonly used
steels. Typically, as the carbon content in steel rises, the steel becomes stronger and
harder but becomes less ductile, more brittle and harder to weld. The higher carbon
content also lowers the melting point and the temperature resistance of the steel. Carbon
steel’s great strength can be attributed to carbon atoms fitting into the interstitial crystal
lattice sites of the body-centered cubic arrangement of the iron atoms. This reduces the
mobility of crystallographic defects, which then has a hardening effect on the iron.
Carbon steel can be broken down into four classes depending on the concentration of
carbon. These are low-carbon steels, medium-carbon steels, high-carbon steels and
ultrahigh-carbon steels. Low-carbon steels can contain up to .30% carbon, and are
usually flat-rolled products, which are typically used for the outside body of automobiles
and other vehicles, and for major appliances, magnetic cores, tin plate, and wire products.
Medium-carbon steels have a carbon concentration that ranges between .30 and .60%,
with the manganese from .60 to 1.65% concentration. The typical use for medium-
carbon steels is for shafts, axles, gears, crankshafts, couplings and forgings. The higher
end of carbon concentration for medium-carbon steels allowed them to also be used for
rails, railway wheels and rail axles. High-carbon steels can have a carbon concentration
between .60 and 1.00%, with a manganese concentration of .3 to .9%. These are
typically used for materials for springs and high-strength wires. Finally, ultrahigh-carbon
steels can contain from 1.25 to 2.0% carbon concentration. These steels are incredibly
hard, and are used for special purposes such as knives or powder metallurgy. The heat
treatment of carbon steel is meant to change its mechanical properties, such as ductility,
hardness or impact resistance. Cooling the steel rapidly will produce a finer pearlite,
which is 88% ferrite and 12% cementite, while cooling it slowly will result in a coarser
pearlite.
Alloy steel is steel that is alloyed with other elements to improve its mechanical
properties. Alloy steels can be divided into two general groups, low-alloy steels and
high-alloy steels. While low-alloy steels have alloy contents between 1 and 4%, high-
alloy steels can have between 4 and 50% alloy content. Most alloy steels are low-alloy
steels, and as such alloy steel typically refers to low-alloy steel. Generally speaking,
alloy steels have a much greater strength, hardness, wear resistance, and toughness
compared to carbon steel. Heat treatment, though, may be necessary to attain these
properties. Customary alloying elements include boron, vanadium, nickel, silicon,
chromium, manganese and molybdenum. Low-alloy steels can either be determined as
low-alloy steels or high-strength low-alloy steels. High-strength low-alloy steels are
designed to meet specific mechanical properties rather than a chemical composition. The
carbon content in these steels is low, typically between .05 and .25%. This is in order to
produce sufficient weldability and formability. They can be composed of small
quantities of chromium, copper, nitrogen, niobium, zirconium, titanium, vanadium, nickel
and molybdenum in various combinations. Various types of high-strength low-alloy
steels can also have small additions of calcium or rare earth elements. Low-alloy steels
are generally used to attain a higher hardenability, in order to improve other mechanical
properties. These steels are also used to increase corrosion resistance in specific
environmental conditions.
Stainless steel is a steel alloy with a minimum of 10% by mass chromium content.
Stainless steel is interesting in that it does not stain, rust, or corrode as easily as normal
steel. Up to 26% chromium composition by weight can be used for harsh environments.
The amount of the chromium present in stainless steel is the main property that sets it
apart from carbon steel. Carbon steel will rust once exposed to air and moisture because
of its iron oxide film accelerating corrosion by forming more iron oxide. Stainless steels,
on the other hand, have enough chromium present that a passive film of chromium (III)
oxide will form, preventing further corrosion. This layer is virtually impervious to water
and air, and will quickly reform once scratched. This is known as passivation and can be
seen in other metals such as aluminum and titanium. Stainless steel’s unique properties
of resistance to corrosion and staining have made it an ideal material for commercial
applications. Stainless steel’s many applications include coils, sheets, plates, bars, wire,
tubing, cookware, cutlery, surgical instruments, hardware, jewelry, watches, major
appliances, construction material, automotive materials and storage tankers. There are
several different types of stainless steels, for example, carbon can be added for greater
hardness and strength. Stainless steels are classified by their crystalline structure as well.
Among these are austenitic stainless steels, ferritic stainless steels, martensitic stainless
steels and duplex stainless steels.
Economically and financially, ArcelorMittal is a pretty successful company. Last
year, their revenues were US$105.216 billion, with a revenue growth of 78.58%. The net
income was around $11.850 billion. The earnings per share were approximately $7.4, the
EPS growth rate was 40.15%, and the total equity was $61.535 billion. The profit growth
was 94.71%, the profit margin was 11.26%, the return on equity was 28.13%, and the
debt to equity ratio was .36%. However, since June of 2008, share prices have
plummeted by around 79.60. Yet this can more than likely be attributed to the recent
economic problems more so than anything else. The company’s corporate organizational
structure is as such: Lakshmi Niwas Mittal is the Chairman and CEO of ArcelorMittal,
and Aditya Mittal is the CFO. Along with Both Lakshmi Mittal and Aditya Mittal,
members of ArcelorMittal’s Group Management Board include Michel Wurth, Gonzalo
Urquijo, Sudhir Maheshwari, Christophe Cornier and Davinder Chugh. All of these
members sit on the Management Committee as well. The Board of Directors, which is
composed of 11 members, is responsible for the actual supervision of ArcelorMittal,
following the principles agreed upon from the merger in 2006.
Since Mittal has focused on internationally expanding his company since 1976,
ArcelorMittal’s geopolitical standpoint is extremely impressive. ArcelorMittal has a
place on the stock exchanges of Amsterdam, Brussels, Madrid, New York, and Paris
among others. ArcelorMittal also has places of work in over 60 countries. ArcelorMittal
has access to key markets across North America, Asia, Africa and Europe, and they plan
to expand more in China and India in the future.
Most of the current events surrounding ArcelorMittal focus around the global
financial crisis that is happening. Last Friday, November 28, 2008, ArcelorMittal
responded to this crisis by announcing plans to cut up to 9,000 jobs, about 3% of its
workforce. Most of these job losses are expected to come from western European
offices, and this plan was put in place in order to save the company $1 billion a year.
They also plan to reduce their global steel output by 35 percent. Among these layoffs
included were 2,444 planned layoffs at an Indiana plant. However after significant
complaint, the company has decided to lower that number by 80%. Reducing the number
of jobs cut to 490 at the Indiana plant as opposed to 2,444. This does not change the fact,
however, that 9,000 layoffs are still planned worldwide. This global economic slow
down has made a hard hit to the entire steel industry, prices have tumbled, prompting
steel companies to severely decrease production and delay plans. ArcelorMittal, along
with the layoffs and decreased production output, has halted an expansion plan that
would have increased steel shipments by a fifth by 2010. European workers, especially
from France, have recently been agitated by ArcelorMittal’s bold move as well. It is
predicted that 6,000 of the layoffs are to happen in Europe, 1,400 of which are in France.
However, Lakshmi Mittal’s handle of the situation is winning “grudging approval”. This
quick response to this disaster is impressive and appropriate.
Overall, ArcelorMittal is among the top companies in the world, with over
360,000 employees in over 60 different countries. The company’s financial history is
very impressive, and although there are difficulties now with the economy, it is likely that
ArcelorMittal will come out on top of the situation. ArcelorMittal will continue to
supply the world with more than 10% of its steel supply, catering to several markets,
including automotive, household appliances, packaging and construction materials.
Geopolitically it is hard to be a more worldwide company than ArcelorMittal, with access
to key markets in North America, Asia, Africa and Europe. Most of this success can
probably be attributed to Mr. Mittal himself, who has definitely proved himself to be
somewhat of a financial genius.

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