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ArcelorMittal seeks to ensure iron ore supplies news
09 April 2008

Mumbai: Steel giant ArcelorMittal plans to produce up to 70 per cent of its iron ore requirements by 2012, to protect itself from surging raw material prices, a senior official of the company said.

Iron ore prices have jumped nearly 70 per cent in the 2008-2009 contract year, amid strong demand for steel. Coal prices have more than doubled. These are expected to dent the earnings of steelmakers around the world.

ArcelorMittal also plans to boost its annual steel production capacity 18 per cent to 130 million tonnes by 2012.

Currently, ArcelorMittal has control over 10 billion tonnes of iron ore, enough to meet 45 per cent of its requirements.

The company is planning additional investments to expand raw material production.

While much of this will be organic growth, through expansion of existing operations in emerging markets like China, Russia, and Brazil, the company is also planning greenfield expansion in India.

Meanwhile, a UBS report said ArcelorMittal had agreed for a 220 per cent increase in contract prices of high quality hard coking coal by mining group BHP Billiton for 2008.

While the company is looking at acquisitions, anti-trust regulations in the US and Europe are likely to come in the way of inorganic growth.

While ArcelorMittal, the world's largest steel company, controls over 10 per cent of global steel capacity, companies like Vale, Rio Tinto and BHP Billiton control over two-thirds of the world's iron ore trade.

The steel market is currently supported by a 500 million tonne shortfall in production. Despite slowing demand in developed economies led by the US, emerging economies like India and China continue to consume huge quantities of the metal, helping to offset the slower demand elsewhere.

ArcelorMittal, meanwhile, completed the acquisition of Venezuela's steel pipe producer Unicon, which produces 750,000 tonnes per year of tubular products.

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ArcelorMittal seeks to ensure iron ore supplies