Strategies driving ArcelorMittal
Historically, ArcelorMittal (MT) has been growing through a series of acquisitions. There have been other steel companies like Tata Steel, which acquired Corus in 2007 to enter into the league of top ten steel producers globally, but hasn’t been able to turn around the company. ArcelorMittal has been successful at integrating acquired companies. This has been a key factor for its success.
Lessons learned from the crisis
Lakshmi N. Mittal is an astute businessman. He has learnt his share of lessons from the global financial crisis. The company has slowed its pace of acquisitions. It also rolled back a series of planned expansions. The focus now has turned to raw material security. It’s now the fifth largest mining company in the world. The company has been acquiring a lot of mining assets worldwide. Let’s analyze the importance of mining assets for the company.
Integrated business model
Steel is a raw material intensive business. Raw material supply remains a key driving factor behind the success of any company in this sector. It’s important for other steelmakers like United States Steel Corporation (X), Nucor Corporation (NUE), Reliance Steel & Aluminum (RS) and exchange-traded funds (or ETF’s) like the SPDR S&P Metals and Mining ETF (XME). The previous chart shows the growth in ArcelorMittal’s iron ore mining. In 2013 it produced 70.1 million tons of iron ore and 8.8 tons of coking coal. It met 62% of its iron ore and 19% of the coal requirement through internal mining operations and strategic contracts. Backward integration helps ArcelorMittal to tide over the volatility of raw material prices.