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KAZAKHSTAN: Kazakhs warn Mittal over safety

by Isabel Gorst in Moscow and Peter Marsh in LondonThe Financial Times Limited 2008
February 19th, 2008

Kazakhstan has warned ArcelorMittal, the world’s biggest steel company, that it could be forced to close one of its coal mines if it does not improve safety following an explosion last month that killed 30 people.

Vladimir Bozhko, head of Kazakhstan’s ministry of emergencies, has given ArcelorMittal one month to draw up a plan to introduce 41 safety reforms at the company’s Abaiskaya mine in central Kazakhstan, where the blast took place.

Accidents in Kazakhstan, where ArcelorMittal employs 50,000 people, have killed 191 of the company’s workers in the past 12 years.

The emergencies ministry accused ArcelorMittal of neglecting safety during the breakneck expansion of Abaiskaya, where production has risen more than 30 per cent since 2001 to reach 1.3m tonnes last year, roughly 10 per cent of the company’s global coal production.

Abaiskaya is one of several mines operated by ArcelorMittal in Kasakhstan to feed its huge and highly profitable Termirtau steel plant there.

ArcelorMittal has invested more than $1.4bn since it moved into Kazakhstan in 1996.

The closure warning is a blow to the reputation of the Luxembourg-based company, which is controlled by the Indian billionaire Lakshmi Mittal, its chief executive.

It also puts Mr Mittal on a potential collision course with Nursultan Nazarbayev, Kazakhstan’s long-serving president, with whom the steel magnate is on good terms.

The company’s Kazakh operations have set the tone of other moves by Mr Mittal to take over underperforming industrial sites, often in the former Soviet Union or other communist nations, and turn them into profitable ventures.

ArcelorMittal said it was “working closely” with the Kazakhstan government on health and safety matters, and had committed $350m to help bring its coal mines in the country to internationally recognised standards.

“During the coming month we will be presenting to the government our plans for the next five years, many of which are already being implemented.

“The safety of our employees is and will remain our number one priority,” the company said.

Charles Bradford, of Bradford Research, a US steel consultancy, said: “The company has done a lot in Kazakhstan [to improve safety] but it needs to do more.”

Rob Johnston, an official at the International Metalworkers’ Federation, a body representing steel industry employees, said Kazakhstan’s action was a “positive move” as it would increase the pressure on ArcelorMittal over safety standards.

Last week Karim Massimov, Kazakhstan’s prime minister, announced that the government would nationalise by the end of the year any natural resource projects where investors were found to have breached contract regulations.

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