Gov't 2-step on steel has players dancing

Lakshmi Mittal, chairman of multinational steel giant LNM Holdings met with representatives of the government last week to reaffirm interest in the privatization of state steel holding Polish Steel (PHS). The government, which approved its own program for the mill's restructuring at a cost of zł. 2.4 billion ($571 million), has yet to announce a clear intention to sell PHS.
PHS is the core of the steel industry restructuring program that the cabinet accepted last week as its own strategy to prepare the sector for unsubsidized competition on the European Union market by 2006. LNM Holdings wants to integrate PHS into its Central European portfolio, which so far includes Nova Hut in the Czech Republic and Ispat Sidex in Romania.
"We believe that there is interest from the Polish side but the government has to first finalize the privatization structure," said Annanya Sarin, the head of corporate communications at LNM Holdings. "We believe that the government is progressing and that was why we were there to meet with officials and reinforce our interest."

LNM Holdings has remained tight-lipped about its plans to turn around profitability at the four PHS mills until it has renewed its due diligence.
Meanwhile, the government announced that it would cut production capacity in the steel industry by 901,000 metric tons a year, including a cut of 686,000 tons at PHS, which represents around 70% of domestic steel output and has a combined annual turnover of zł. 7 billion ($1.7 million).
But the lack of official signals on PHS's privatization has not unsettled LNM Holdings, which sees the government's recent moves in restructuring the conglomerate as compatible with its interests.
"They've done a good thing in putting PHS into one structure because that in itself will help the restructuring and consolidation of the Polish steel industry," Sarin said. "It needed to be done."
The LNM Group is the world's second largest steel producer, with a steel-making capacity of 35 million tons a year and generated net sales of $6.2 billion in 2001. The company's steel clients include automakers Ford, General Motors, Honda and Toyota.