For $12 billion, Ratan Tata bought himself a seat at global steel’s top table. Right next to another Indian, Lakshmi Nivas Mittal.
Arcelor-Mittal is the world’s biggest steel producer. The Corus-Tata deal combine will be the fifth largest steel company in the world. Both will be major presences in Europe, where the modern era’s industrial revolution began, powered by industrial-scale production of cheap steel. The deal will rewrite the history of European industry. In steel, at least, power has shifted from the capitals of erstwhile colonial empires to their former colonies.
India is also set to emerge as the fifth largest steel producer by 2007-end. Currently ranked seventh, the 19 million tonnes brought in by Corus will push Indian-owned capacity to fifth place, nudging out Germany and South Korea.
With Mittal and Tata now the top two steel producers in Europe, the focus will shift eastwards. And the looming presence of China.
The question intriguing steel sector watchers is not why the Tatas bid for Corus, but rather, why Mittal did not. The world’s richest Indian had looked at Corus for a possible buyout but decided to go for the bigger Arcelor instead. While Corus is a big player in Europe, Arcelor is also the largest steelmaker in South America.
It also outlines the different approach of Mittal and Tata. Mittal started from South-east Asia and has gone on to acquire little-known steel companies all over the world. His speciality is turning around loss-making or sick steel plants, ironically using Indian executives sourced largely from India’s much-maligned public sector steel units. His acquisitions have been in Romania, Bosnia-Herzegovina, Poland, Czech Republic, Indonesia, Kazakhstan, Ukraine and Turkey.
Tata, in contrast, has largely been acquiring companies that operate in established markets with good brands. Tetley based in the UK, Hispano Carocerra in Spain, Daewoo in Korea and Natsteel in Singapore all sell in developed markets. It is similar to the Tata Steel strategy of making steel close to where iron ore is available and the finishing it closer to the market.