Barriers to Trade in Selected European Union
Industry Scenario Analysis Of Arcelormittal Economics Essay
Steel is a very important material used in everything from construction to machines, automobiles, appliances and even weapons. Steel has laid the foundation for modern civilization and it played a crucial part in the development of industries all over the world. Essentially it is an alloy with a major content of iron and the rest carbon varying anywhere between 0.2 percentage and 2.1 percentage. Steel itself has been in existence over many hundreds of years but the process of making it has evolved as years progressed along with technology. Steel distinguishes itself from other metals and alloys based on rust resistance, recyclability and weld ability.
The advancement of the steel industry is often linked to the economic development as it played a crucial role in it. Around 1.3 billion tonnes of steel was produced in 2007. And according to reports it is expected to grow by more than 10 % in 2010. (Peter Marsh, 2009)
ArcelorMittal Mittal steel acquired Arcelor in June 2006 to become the world’s largest steel producer. With operations in more than 60 countries it has its industries rooted in more than 20 countries over four continents. Arcelor based in Luxemburg was the biggest steel producer in Europe when Mittal acquired it after a dramatic five month long takeover battle. Currently Mr.Lakshmi Mittal is the Chairman and main owner of ArcelorMittal.
According to ArcelorMittal, it had a crude steel production of 73.2 tonnes which is approximately 8 percentage of the total steel production in the world. It had revenue of $65.1 billion. Listed in stock exchanges of New York, Amsterdam, Paris, Luxemburg, Brussels and Spain it is a global industrial force to be reckoned with (ArcelorMittal, 2010).
Major Competitors in the Steel Industry After the acquisition of Arcelor, ArcelorMittal firmly established itself as the leading steel producer in the world. According to the World Steel Association in 2008, the top 5 players in steel the industry were:
Hebei Steel Group
Rank Company Amount of Production (Million Metric Tonnes)
Hebei Steel Group
(World Steel Association, 2008)
Key Competencies The steel industry focuses on core competency factors such as:
advanced technology for example use of advanced laser cutting tools during the production stage
environment sustainability by ensuring no damage or pollution to nature
employee enrichment example good training and technological exposure
effective management of competition with superior technology with constant research and development
responsibility to shareholders
ArcelorMittal claims the entire above core competencies required in the industry. It has developed a robust corporate social responsibility strategy with the four key points of focus:
making steel more sustainable by making steel production greener and environmental friendly
transparent governance by careful study of impacts and risks and improvement in quality of disclosure to stakeholders
enriching communities by engaging them and progressing with partnerships and open communication
investing in people by ensuring safe and healthy work environments which is also innovative
These four key strategies form their core competency strategy and were formed soon after the merger of Arcelor and Mittal by careful research and studies into other major players in the industry (ArcelorMittal, 2010).
Key Resources The steel industry depends on all or most of the following key resources for its sustainability and growth:
Research and development resources
(Steel University, 2002)
Growth rate and Profitability of the Steel Industry According to the World Steel Association, the major steel production over the world has increased as compared to the previous year. The production in 2009 November was 107.5 million metric tonnes (mmt) which was 24.2 % more than in November 2008. They claim that a month on month comparison with the previous year production definitely shows more production in 2009 as compared to 2008.
(World Steel Association, 2010)
In terms of profitability, steel prices have had a steady rise helping many companies like Fosun in China to move up in the list from fifteenth to sixth position. Reports clam that it had revenue of $5.7 billion last year. Price of steel has increased over the last year by 35 % and is currently at $ 230 per tonne (Michael Sainsbury, 2010). Many steelmakers in Europe and U.S are investing more in the industry indicating a possible increase in profitability (Alex MacDonald