The combination of strong upstream activities in the form
of iron ore, coal and coke production and significant downstream activities such as wire, pipe and tube production is one of the hallmarks of Mittal Steel.
While many steel producers have chosen to focus solely on steel-making for the past 25 years, Mittal Steel has consistently invested in captive sources of raw material whenever it was economic to do so and taken advantage of attractive opportunities to add to its downstream activities.
Against the backdrop of sharply rising coal and iron ore prices, the advantages of maintaining captive upstream resources are increasingly being recognised. Mittal Steel has enjoyed a degree of insulation from raw material price increases by being able to source more than 40 per cent of its iron ore and coal requirements from Group companies and strategic contracts. Its reserves of iron ore are 2 billion tonnes; and reserves of coal are 1.3 billion tonnes.
In coke, Mittal Steel owns more than 15 million tonnes of annual production capacity – which meets the company’s overall annual requirements. Following the acquisition of Mittal Steel Poland, the Group is now the number one producer of coke in Europe. Mittal Steel is also the world’s largest producer and user of direct reduced iron (DRI) with a capacity of 11 million tonnes. DRI is a major input material at the Group’s plants in Mexico, Canada, Germany, Trinidad and South Africa – and plays a major role in the drive for quality and cost flexibility.
During 2004, Mittal Steel added iron ore assets in Kazakhstan and Bosnia. In Kazakhstan, the acquisition of additional iron ore reserves together with the modernisation of existing assets is intended to make Mittal Steel Temirtau self-sufficient in iron ore by the end of 2005. It is already self-sufficient in coal and power.
In Bosnia, Mittal Steel acquired a majority interest in a joint venture to mine and develop the Ljubija iron ore mines. The Ljubija joint venture agreement was one of a series of transactions in Bosnia and Macedonia in 2004 that together have resulted in the establishment of a new, vertically integrated operation in the Balkans producing slab, long products, pipes and tubes – all drawing on a captive resource of iron ore. Mittal Steel acquired majority holdings in Bosnia’s BH Steel, now Mittal Steel Zenica, and in a hot strip mill and a cold strip mill in Skopje, Macedonia. With a $135 million ten-year investment programme planned for the Zenica plant, it is intended to lift production from 200,000 tons a year to over 2 million tons. The plant could supply slab to the two rolling mills, which have a current design capacity of 0.8 million tons and 0.75 million tons a year respectively.
Mittal Steel has reaped benefits from its ownership of substantial downstream activities. The combination of upstream and downstream facilities provides a hedge against price fluctuations and permits a steel-maker to better manage market volatility. In addition, its downstream presence has enabled Mittal Steel to get closer to its end-customers, better understand their requirements and build a better brand presence.
Mittal Steel is now one of the world’s largest pipe and tube producers and has a significant presence in wire products. Its coating and galvanising operations include state-of-the-art facilities at I/N Tek and I/N Kote in the US joint venture with Nippon Steel. In 2004, it further added to its downstream facilities in Europe with the acquisition of the Romanian steel-maker Siderurgica Hunedoara which brought with
it three rolling mills. Taken together with the acquisitions of Iasi and Roman in Romania, completed in late 2003, this has cemented Mittal Steel’s position as one of Europe’s leading producers of pipe and tubes.
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