Ispat holding firm seals Zimbabwe steel deal

Global Steel inks 20-year contract with Zimbabwe to run Ziscosteel.

Global Steel Holdings, a special purpose vehicle of Pramod Mittal and Vinod Mittal, has signed a 20-year management contract with the Zimbabwe government to upgrade and operate Zimbabwe Iron and Steel Company (Ziscosteel).

The development comes even as brother Laxmi Niwas Mittal, the world's largest steel maker, is busy lobbying hard among Europeans for his bid to take over competitor Arcelor.

Global Steel has agreed to inject $ 400 million (close to Rs 1,800 crore) to restructure the Zimbabwe company, sources close to the development said. Global Steel is the holding company of Ispat Industries.

Zimbabwe Central Bank Governor Gideon Gono announced the contract on Wednesday at a briefing attended by Zimbabwe government and Global Steel officials in Harare. "Global Steel would inject foreign currency for rehabilitation of Ziscosteel plant components," he said at the briefing

Sources said Ziscosteel was the main foreign currency earner for Zimbabwe prior to its independence from Britain in 198O. But since the 1990s, the company has been plagued by lack of capital to requip its plant and its annual production plummeted to nearly 80,000 tonne.

Sources said Global Steel would get a royalty payment for the management of Zisco. They, however, declined to divulge further details.

The agreement, one of the biggest foreign investments in recent years in Zimbabwe, would boost Ziscosteel's annual production to over one million tonne. The production would grow 17 times by the end of the 20-year contract period.

Ziscosteel, the only steel company of Zimbabwe, has a steel mill, power plant, cokery and coal mine. The company producs billet, rebar and medium sections and will remain in government hands for the period of the contract.

The agreement is significant for the southern African country, which has been struggling to get out of economic and political crises. Zimbabwe had earlier identified Ziscosteel among underperforming state companies to be privatised to revive its ailing economy.

Global Steel Holdings, which had taken full control of Ispat Industries in September last year, has assets of about $7 billion.