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The Tower of Piffle

Boris Johnson’s ‘Tower of Piffle” is one of the names invented by journalists for what is properly called the ArcelorMittal Orbit. It is being erected close to the Olympic stadium in east London. ArcelorMittal is the largest steel producing company in the world. Its chairman and CEO is Lakshmi Mittal.

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A chance encounter

The following is taken from; In the wake of ArcelorMittal: The global steel giant’s local impacts, published May 2008 by a coalition of agencies critical of the social and environmental impacts of ArcelorMittal plants. (Now called Global Action on ArcelorMittal) Download PDF

“After working in his father’s small steel business and successfully opening a steel plant in Indonesia, Lakshmi Mittal branched out on his own and made his fortune by buying up old plants around the world and turning them into profitable ventures.

The success of the company has coincided with the exploitation of weaker national laws and political wrangling. In the last three decades Mittal has bought up old, run-down state-owned steel factories in places like Trinidad, Mexico, Poland, Czech Republic, Romania, South Africa and Algeria.

The cost of Mittal Steel’s success has largely been paid by the communities living and working near the company’s plants. Mittal Steel has a global reputation for prioritising productivity over the environment, communities and fair labour practices in countries where it operates steel mills, such as Romania, Poland, Czech Republic, South Africa, Kazakhstan and the United States, in spite of frequent company statements about its attention to and investment in these areas.

One of the most disappointing aspects of the Mittal success story is how, in spite of its poor environmental and social record, decision-makers and international financial institutions have repeatedly supported the company, politically and financially, implicitly condoning its working practices.

Most notoriously, Mittal was seen to have bought political influence in acquiring the Galati plant in Romania when former British Prime Minister Tony Blair intervened to help Mittal steel buy the Romanian Galati steel plant a month after the tycoon donated £125,000 ($250,000) to Blair’s New Labour Party. In an extraordinary letter, Mr Blair told Romania’s prime minister that selling his biggest state-owned enterprise to Lakshmi Mittal would enhance the country’s chances of joining the European Union.

The company has benefited from tax exemptions or reductions in several countries including Kazakhstan and the Czech Republic, but the question has to be asked: why can’t the largest steel company in the world afford to pay full taxes?

Mittal Steel has also received extensive assistance in the form of low-interest loans from the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD).

The purpose of the loans has varied, but several have aimed at least partly at improving energy efficiency, reducing pollution or improving health and safety standards. Several, if not all, of the projects have required the preparation of environmental action plans.

No one expects that the steel plants and mines would have been transformed overnight, but after several years there should be visible improvements. However, civil society groups in Romania and Ukraine have not even been able to obtain the environmental action plans in order to assess any ongoing progress. Where information has been made available, it was usually disclosed by the EBRD rather than the company.

According to the EBRD some improvements are being made through the environmental action plans in Galati and Temirtau. Attention should however be paid to anecdotal evidence from Romania and Ukraine indicating that the company’s enthusiasm for cost-cutting also extends to its investments in health and safety and environmental improvements, resulting in some improvements appearing on paper only. Without regular access to the plants, it is impossible to estimate how frequently this occurs, but it does indicate the need for thorough monitoring of those investments planned to take place within the framework of loans already extended by the EBRD and the IFC.

Due to continued exploitation by the company and neglect by their own governments, people are fighting for their rights against ArcelorMittal in both the northern and southern hemispheres, opposing problems like pollution, poor safety standards, forced eviction, and the acquisition of agricultural land.

An…. important problem stems from the unequal power relation between the respective government and the steel company. In most cases, decision-makers are reluctant to put meaningful pressure on Mittal to raise its standards, as its plants employ a large number of people and it is often the main employer in the area. Any move by governments that is seen to endanger relations with Mittal is extremely controversial. ………

In India, Mittal’s huge investment plan is being seen as a major revenue generation project in the region, thus rendering the state government oblivious to the plight of the local communities, who – if the project goes ahead – are eventually going to lose their agricultural land to the Mittal steel project.

All over the world people with their own meagre means and resources are struggling to hold ArcelorMittal accountable and to protect their communities. This compilation is an effort by the various groups working in different parts of the world to come together to expose the global nature of the problems caused by ArcelorMittal and to demand serious action by the company and decision-makers to ensure justice for the affected communities.”

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In June 2008 a response from the company on Global Action on ArcelorMittal’s report In the wake of ArcelorMittal stated:

“…we believe that there are several instances where you may not have received all the relevant information to make a fully informed judgment about our operations.”

In May 2009 Global Action on ArcelorMittal published a follow-up report; ArcelorMittal:Going nowhere slowly, A review of the global steel giant’s environmental and social impacts in 2008-2009. Download PDF

It said,

“There has been a clear recognition among ArcelorMittal’s management that many of its plants require significant improvements in their environmental and health and safety performance. The merger of Arcelor and Mittal Steel has provided a stimulus to ensure that environmental and health and safety standards are applied equally at all plants and that a culture of transparency is developed throughout ArcelorMittal. In 2007 and 2008 ArcelorMittal developed a corporate responsibility management structure in order to implement this.

ArcelorMittal’s management said it would encourage its local companies to disclose information. One year later, an Environmental Action Plan has been published only in Bosnia-Herzegovina, with an update report on environmental investments disclosed in Ukraine but not the plan itself. In South Africa the Environmental Master Plan has still not been released.

Even more alarmingly, ArcelorMittal has failed to implement its flagship Stakeholder Engagement Plan in Kazakhstan. None of the promised documents have been released and some of the requests for information sent by Karaganda EcoMuseum on health and safety in the mines and on an agreement with the Kazakh government related to the financial crisis have not been answered. This illustrates how much work the company still has to do even in the relatively simple matter of releasing existing information.

The company’s Luxembourg management has indicated that ArcelorMittal has not yet developed a consistent culture of responsibility and transparency throughout its operations, but that it would not be possible to go over the heads of local management in releasing information. Given that ArcelorMittal presumably has a number of relatively enforceable company-wide policies on other issues, it seems strange that local managements cannot be more effectively persuaded to take their transparency obligations seriously.

In most of the cases that Global Action on ArcelorMittal is monitoring, there are no visible improvements regarding pollution. If investments have been made, apart from scant snippets on the company’s website we can only guess what has been done, and what has been the real overall effect on local environments. For example, if pollution is reduced per tonne of steel, this is useful only in so far as the company does not expand steel production. What matters to people’s health is the total amount and type of pollution.

In the absence of any progress with fitting modern filters at the Cleveland, Ohio plant, relief for residents’ lungs came only when ArcelorMittal announced a two-month idle of its blast furnaces in October 2008. At the end of February 2009, the company announced it would continue to idle and would shift 100 of the plant’s 300 salaried positions to its plants in Indiana and West Virginia. On March 6, 2009, Mittal announced it would halt operations at the mill and finishing plant, laying off 990 steelworkers. Ohio Citizen Action addressed the company with an appeal to use the idle time wisely:

“Now is the time for Mittal Steel to work on a plan for pollution prevention at the Cleveland plant, in order to make an investment at the facility before it is brought back to full production. While your company works on plans for efficiency during the current economic downturn, pollution prevention is a key element to achieving efficiency at any facility. You can make money and benefit your workers through pollution prevention, and show that you are a true leader in the steel industry.”

So far there has been no response from the company.

Meanwhile in Kazakhstan and Ukraine the company used the crisis to win concessions from governments desperate to keep thousands of steelworkers in their jobs. The governments of both Kazakhstan and Ukraine signed memoranda of understanding with ArcelorMittal.

The government of Ukraine signed a memorandum of understanding with ArcelorMittal granting postponement of some modernisation investment obligations that had been stipulated during the privatisation of the company, as well as providing tax breaks and state subsidies such as lower prices for electricity, and gas, and railway rates, freezing the fees charged for the use of extractive resources and facilitating preferable purchase of “Ukrainian” steel on the internal market.

In Kazakhstan the company was granted reduction of social tax, reduction of railway rates and the use of part of a railway and a station, a 2009-2011 emissions permit, postponement of environmental penalties, assistance with state purchases, assistance with land allocation and the use of water sources. The Kazakh authorities’ agreement marked a dramatic turnaround from earlier in the year when they were threatening to revoke the company’s operation licence due to poor health and safety conditions in its mines.

The National Ecological Center of Ukraine, together with Global Action on ArcelorMittal, emphasised to the Ukrainian government that: “We … consider it to be socially unfair for taxpayers and other businesses to bear the additional burden of subsidising energy and transport costs for ArcelorMittal….”

The company has since tried similar tactics in Ostrava, Czech Republic, asking for financial support and postponement of some of its environmental investments.

Unfair money-making practices of a different kind also came to light in 2008 when it was reported in December that three ArcelorMittal subsidiaries in France, along with eight other companies, had been fined a record EUR 575 million for creating a cartel on certain steel products between 1999 and 2004.

According to Le Conseil de la Concurrence (the Competition Council), the companies had set prices, divided up contracts between them, blocked exterior rivals and punished those who deviated from the agreements. PUM Service Acier, a division of ArcelorMittal, was ordered by Le Conseil de la Concurrence to pay EUR 288 million, after it was found to be one of the three cartel leaders, and in total the three ArcelorMittal subsidiaries involved were fined a total of EUR 302 million.

Although Le Conseil de la Concurrence found no evidence that the parent companies were aware of the cartel, we believe that this case should be of concern for the whole company as it represents a significant and sophisticated breach of EU competition law.

In South Africa, as elsewhere, the company is not operating at 100 percent production due to the financial crisis. Over the last two years there has also been an ongoing challenge with the South African Competition Tribunal for excessive pricing. ArcelorMittal has appealed the USD 65 million fine imposed upon it, which represented about 12 percent of ArcelorMittal South Africa’s 57.2 billion-rand profit in 2007.”

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See also: Lakshmi Mittal's Arctic Mega-mine, Terry Macalister, Guardian

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