The Turnaround of Ispat Imexsa
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : BSTA007
Case Length : 11 Pages
Period : 1992 - 2003
Pub Date : 2005
Teaching Note :Not Available
Organization : Ispat; Imexsa
Industry : Steel
Countries : Mexico
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction
When Lakshmi Mittal (Mittal) acquired a loss making steel mill from the Mexican government in 1992, the move did not attract much international attention. Industry observers did not expect a spectacular turnaround, despite Mittal's success at turning around Iscott, the loss making steel plant leased from the government of Trinidad and Tobago in 1989.
The Mexican plant's inherent problems coupled with the unstable peso (the Mexican currency) did not make the deal appear a
"very promising one".
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Background
In the early 1980s, the Mexican government decided to build a new steel mill called Sicartsa II. The facility was to be located in Lazaro Cardenas, adjacent to the government's existing steel making facility at Sircasta.
The 2.2 million ton plant, commissioned in the late 1980s, had four direct reduced iron (DRI) modules with a combined capacity of 2 million tons per year (tpy), four 200-ton electric-arc furnaces (EAF), and two continuous twin-strand slab casters with a maximum width of 1,950 mm (76.7 inches). The plant also had a partially completed iron-pelletizing plant and an unfinished plate mill.
The cranes and buildings for the plate facility had been built, but the mill equipment itself was still in crates. Even before the factory was completed, the oil boom ended. This, coupled with a faltering economy, forced Mexico to devalue the peso. The government curtailed the investment in the planned pelletiser plant, which forced the Sicartsa management to source high cost iron pellets from the open market...
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