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World's top steelmaker seeks more iron ore sufficiency 11 Apr 2008
ArcelorMittal, the world's top steelmaker, is aiming to supply up to 70 per cent of its own iron ore needs by 2012 to protect itself against surging raw material prices, a senior company official said on Wednesday.
This would lift its self sufficiency of the iron feedstock from 45 per cent now, as the company seeks to boost its steel production 18 per cent to 130 million tonnes per year by 2012.
"Today we have under our control over 10 billion tonnes of iron ore. Our first priority is control. We want to be in charge of the destiny of the product," Malay Mukherjee, a member of ArcelorMittal's six-person Group Management Board, told reporters in an interview at a mining conference in Singapore.
Iron ore prices have rocketed, jumping about 70 per cent in the 2008-2009 contract year, amid strong demand for steel. Rising costs for raw materials such as iron ore and coal are expected to dent the earnings of global steelmakers this year.
Mukherjee said his firm's raw material expansion plans could be achieved with additional investments.
Most of this growth will be organic, through expansion of ArcelorMittal's existing operations in emerging markets including China, Russia, and Brazil. The company is also planning greenfield expansion in India.
Mukherjee declined to confirm a UBS report on Tuesday that ArcelorMittal had agreed an increase of 220 per cent for high quality hard coking coal with mining group BHP Billiton for 2008 contracts.
But he acknowledged that coal at $300 per tonne was "possible".
The company is also looking for acquisitions, Mukherjee said, but added that this could get more difficult due to antitrust regulations as ArcelorMittal grows.
The company, which was formed in 2006 through a merger of Arcelor and Mittal Steel, the world's top two steelmakers at the time, now controls over 10 per cent of world steel production.
By contrast in the raw materials sector, Vale, Rio Tinto and BHP Billiton control over two-thirds of the world's seaborne iron ore trade.
Despite slowing demand from developed economies led by the United States, Mukherjee said the world steel market will be supported by a 500 million tonne shortfall in steel production as high material costs take their toll on smaller steelmakers.
Emerging economies like India and China will continue to consume huge quantities of metal which would help offset the slower demand elsewhere, he said.
CEO Lakshmi Mittal told reporters at a seminar in Thailand on Wednesday that ArcelorMittal was conducting a feasibility study for a "complete integrated steel plant" in Thailand, which would take 6-12 months to complete.
Mittal declined to give an investment size, but said such a plant would require at least 2.5 million tonnes of steel production a year and would mainly cater to domestic consumption.
"Thailand is one of our top priority targets," Mittal said.
The London Metal Exchange in February launched steel futures trading for billets, hoping that the $500-billion-a-year steel industry will embrace the contract as a hedge against increasingly volatile prices.
But Mukherjee, who will step down as head of the company's mining and emerging market steel-making operations in May and join its board of directors, did not think this would work.
"Steel is becoming a specialty product rather than a commodity. And for that reason, the contracts today are not viable," he said.
Mukherjee, who oversees ArcelorMittal's pipe and tube business, said the company was seeking to expand its product line-up.
He declined to say if it was bidding for French steel tube maker Vallourec, adding such talk only served to drive up the share price of the potential target company.
On Monday, ArcelorMittal completed the acquisition of Venezuela's steel pipe producer Unicon, which produces 750,000 tonnes per year of tubular products, but Mukherjee could not say how much was paid.
Source: AAP NewsWire
