Mittal's investment hope
The secured continuation of steel production at the PHS plant, and its participation with LNM's multinational enterprise, is set to boost investment in the auto sector in particular, LNM Holdings' Vice Chairman Aditya Mittal told the Business Journal last week.
Mittal, son of LNM owner Lakshmi Mittal, the billionaire industrialist reputedly the wealthiest Asian resident of the United Kingdom, identifies a continuing explosive investment drive by his company into the Central and Eastern European (CEE) region over the last three years, with a presence in Poland as a major strategic objective.
"In 2000, we were virtually non-existent in CEE," says Aditya Mittal. "In three years, we have become the largest player in this market, with a capacity of almost 17 million tonnes of steel making."
The investment is worth zł.3.9 billion ($1 billion) and represents a 23.4 percent stake in the PHS plant. In a new course for privatisation, this investment did not involve a trade union 'social package'. However, current employment has been guaranteed by LNM until 2009, and there will be an immediate bonus and projected wage increases.
With the completion of their most recent deal in Poland, LNM can boast that they employ up to 65,000 and have CEE revenues of almost zł.21 billion ($5.5 billion). Alongside the PHS site, LNM bought the Nowa Huta plant last year and soon hopes to add Częstochowa to its list of purchases. With a similarly formidable array of possessions in Romania, LNM says that it is now the largest player in CEE.
But rapid acceleration needs a safety belt. LNM is searching for ways to secure coal mines and iron ore so that the necessary raw materials for its products are not disrupted by world shortages caused, in particular, by growing Chinese demand, which has seen the world iron ore price steadily rise this year.
Last week, LNM revealed that it is in talks with the Polish coal industry in order to secure fuel for its steel-making plants. Unlike many rivals, LNM has secured a high degree of vertical integration and appears to be attempting this in Poland, too.
Around one third of the coal LNM uses worldwide comes from LNM mines in Kazakhstan, and the company also controls over half of the world iron ore supplies it requires. CEE buy-ups of steel plants, according to LNM strategy, should be followed by partnerships or buy-ups in related industries in the region.
"Foreign investors reliant on steel, for example auto producers, look for a reliable source of raw materials," Mittal argues. "Within one or two years of our South African investment, the multiplier in the auto sector began to be felt."
The Larchmont Group's Marek Dochnal, an advisor on the successful investment deal, says that the drawn-out negotiations for the LNM investment "may have even cost Poland the recent European Hyundai investment." Dochnal points out that Hyundai is one of the best customers of the LNM group, with Lakshmi Mittal personally trying to persuade Hyundai to come to Poland. Hyundai's answer to LNM, Dochnal says, was that the steel giant's Polish deal had not yet been closed.
"Added to that, U.S. Steel used non-standard proceedings: their advisors produced an anti-LNM report and distributed it to members of parliament," says Dochnal. "The future will show that the government made a good choice because LNM is seriously committed to Poland. U.S. Steel have a very limited presence in this part of the world."
Originally an academic, Dochnal advised on the privatisation strategies for successive governments in the 1990s and was an advisor to the World Bank and the Polish Finance and Industry Ministries. He points out that networking was vital to the process.
"LNM is one man," says Dochnal. "He is not bound by corporate bureaucracy and has excellent personal relations with trade unions. That's why we were able to sign without a social package."
Unlike the troubled 1990s investment by Daewoo in the Żerań plant outside Warsaw, PHS will not be a self-contained venture, Dochnal argues. "This will be the core of something very big, a crucial cog in the works of a world-wide machine," he says. "Żerań was a side show, a speculation that was not integrated into a multinational whole."
"Without Poland, the whole European strategy would have fallen apart. For Lakshmi Mittal, Poland was the most important acquisition he ever made, he said it to me," adds Dochnal, who contrasts the U.S. Steel profile as being less interested in global integration: "Although U.S. Steel has a very successful venture in Europe, it is mostly American."
Dochnal prides himself on being an "interface between Poland and captains of world industry." As the captain of the St Moritz Cartier Polo World Cup winning Team Larchmont, Dochnal is in a good networking position for realizing his goals.
Society has brought Dochnal and Lakshmi Mittal together, but it has also brought the Mittal family controversy in the past. Two years ago, Mittal was embroiled in a now resolved 'cash-for-favors' scandal in the UK. As head of Dutch Antilles-registered LNM Holdings, Mittal gave a L125,000 donation to the Labour Party two months before Tony Blair wrote to the Romanian prime minister in support of an LNM bid to buy Romania's Sidex state steel plant.
"The recent LNM deal is good for Poland, good for the sector, and good for the company that is investing," maintains Dochnal. "Even white good producers, for example Whirlpool, will surely be more attracted to Poland now that steel production here is secured."
Mittal, son of LNM owner Lakshmi Mittal, the billionaire industrialist reputedly the wealthiest Asian resident of the United Kingdom, identifies a continuing explosive investment drive by his company into the Central and Eastern European (CEE) region over the last three years, with a presence in Poland as a major strategic objective.
"In 2000, we were virtually non-existent in CEE," says Aditya Mittal. "In three years, we have become the largest player in this market, with a capacity of almost 17 million tonnes of steel making."
The investment is worth zł.3.9 billion ($1 billion) and represents a 23.4 percent stake in the PHS plant. In a new course for privatisation, this investment did not involve a trade union 'social package'. However, current employment has been guaranteed by LNM until 2009, and there will be an immediate bonus and projected wage increases.
With the completion of their most recent deal in Poland, LNM can boast that they employ up to 65,000 and have CEE revenues of almost zł.21 billion ($5.5 billion). Alongside the PHS site, LNM bought the Nowa Huta plant last year and soon hopes to add Częstochowa to its list of purchases. With a similarly formidable array of possessions in Romania, LNM says that it is now the largest player in CEE.
But rapid acceleration needs a safety belt. LNM is searching for ways to secure coal mines and iron ore so that the necessary raw materials for its products are not disrupted by world shortages caused, in particular, by growing Chinese demand, which has seen the world iron ore price steadily rise this year.
Last week, LNM revealed that it is in talks with the Polish coal industry in order to secure fuel for its steel-making plants. Unlike many rivals, LNM has secured a high degree of vertical integration and appears to be attempting this in Poland, too.
Around one third of the coal LNM uses worldwide comes from LNM mines in Kazakhstan, and the company also controls over half of the world iron ore supplies it requires. CEE buy-ups of steel plants, according to LNM strategy, should be followed by partnerships or buy-ups in related industries in the region.
"Foreign investors reliant on steel, for example auto producers, look for a reliable source of raw materials," Mittal argues. "Within one or two years of our South African investment, the multiplier in the auto sector began to be felt."
The Larchmont Group's Marek Dochnal, an advisor on the successful investment deal, says that the drawn-out negotiations for the LNM investment "may have even cost Poland the recent European Hyundai investment." Dochnal points out that Hyundai is one of the best customers of the LNM group, with Lakshmi Mittal personally trying to persuade Hyundai to come to Poland. Hyundai's answer to LNM, Dochnal says, was that the steel giant's Polish deal had not yet been closed.
"Added to that, U.S. Steel used non-standard proceedings: their advisors produced an anti-LNM report and distributed it to members of parliament," says Dochnal. "The future will show that the government made a good choice because LNM is seriously committed to Poland. U.S. Steel have a very limited presence in this part of the world."
Originally an academic, Dochnal advised on the privatisation strategies for successive governments in the 1990s and was an advisor to the World Bank and the Polish Finance and Industry Ministries. He points out that networking was vital to the process.
"LNM is one man," says Dochnal. "He is not bound by corporate bureaucracy and has excellent personal relations with trade unions. That's why we were able to sign without a social package."
Unlike the troubled 1990s investment by Daewoo in the Żerań plant outside Warsaw, PHS will not be a self-contained venture, Dochnal argues. "This will be the core of something very big, a crucial cog in the works of a world-wide machine," he says. "Żerań was a side show, a speculation that was not integrated into a multinational whole."
"Without Poland, the whole European strategy would have fallen apart. For Lakshmi Mittal, Poland was the most important acquisition he ever made, he said it to me," adds Dochnal, who contrasts the U.S. Steel profile as being less interested in global integration: "Although U.S. Steel has a very successful venture in Europe, it is mostly American."
Dochnal prides himself on being an "interface between Poland and captains of world industry." As the captain of the St Moritz Cartier Polo World Cup winning Team Larchmont, Dochnal is in a good networking position for realizing his goals.
Society has brought Dochnal and Lakshmi Mittal together, but it has also brought the Mittal family controversy in the past. Two years ago, Mittal was embroiled in a now resolved 'cash-for-favors' scandal in the UK. As head of Dutch Antilles-registered LNM Holdings, Mittal gave a L125,000 donation to the Labour Party two months before Tony Blair wrote to the Romanian prime minister in support of an LNM bid to buy Romania's Sidex state steel plant.
"The recent LNM deal is good for Poland, good for the sector, and good for the company that is investing," maintains Dochnal. "Even white good producers, for example Whirlpool, will surely be more attracted to Poland now that steel production here is secured."
