A steel giant

After five months of talks, the heads of Mittal Steel and Luxembourg steelmaker Arcelor signed a EUR 26.9 (zł.110) billion deal that will see the formation of a steel giant called Arcelor Mittal. The new company will produce a 10th of the world's steel.

Mittal improved its January offer by 44 percent and the CEOs of both companies, Indian billionaire Lakshmi Mittal and José María Aristrain, finally shook hands. Arcelor's shareholders will have a 50.6-percent stake in the new company, while Mittal Steel's shareholders will control 49.4 percent. This means Lakshmi Mittal will own 43 percent of the newly formed entity.

Andrzej Ciepiela, director of the Polish Association of Steel Stockholders, thinks that the alliance is good news for the Polish steel industry. He believes this deal will prove much more beneficial for Poland than the one Arcelor had considered signing with Russian steelmaker Severstal. "The deal with Severstal would involve doing politics with Russia, and such alliances between business and politics were never good for Poland," explains Ciepiela. Arcelor had been thinking about a tie-up with Severstal to help fight Mittal's hostile bid made in January.

As Arcelor Mittal will leave other steel companies lagging far behind, the European Commission might force the new company to reduce some of its production in Europe. "There was a scenario that Mittal Arcelor will be forced to get rid of the Arcelor Warszawa foundry; this is what the Office of Competition and Consumer Protection (UOKiK) suggested," says Ciepiela. However, he is certain that Mittal will not sell its big foundries in Katowice and Kraków.

The position of Arcelor Mittal will be strong on the Polish market, but according to Ciepiela not much will change. "Mittal has a more than 70-percent share in the steel market in Poland, but Arcelor has only one foundry in Warsaw, so their potential won't grow substantially," he explains. The implications for the regional market might be more important, though. "Mittal is the biggest steel producer in Poland and Arcelor is the biggest provider of imported steel on the Polish market," says Ciepiela. In this respect the alliance might prove difficult for other steelmakers in the CEE region.

Mittal Steel Poland declined to comment on the deal.