Tags: China

ArcelorMittal Edges Its Way Into China

By , Money Morning •

By Jason Simpkins
Associate Editor

The world's largest steel company, Luxembourg-based ArcelorMittal (MT), expanded its presence in China last week when it acquired a 28% stake in a Chinese steel mill for $647 million. The company announced last Wednesday that it is now a minority shareholder in China Oriental Group Co. Ltd., whose main asset is a northern Hebei province mill that produced 3.62 million metric tons of steel in 2006, the Financial Times reported.

ArcelorMittal paid a 14% premium for the 820 million shares it acquired. ArcelorMittal is now the second-largest shareholder in the company.

China, by far the world's biggest steel consumer, is set to drive global steel consumption up 6.8% in 2008, according to an October forecast from the International Iron and Steel Institute. Though foreign buyouts of industry assets are heavily restricted, ArcelorMittal became the only foreign company to directly own part of a Chinese steel company in 2005, when it bought approximately one-third of Hunan Valin Steel Tube and Wire Co. Ltd.  With its latest acquisition, the steel giant has carved out another niche for itself in the lucrative Chinese market.

ArcelorMittal would like to bring China's eight- largest steel producer, Laiwu Steel Corp., into the fold, as well, but an attempt to acquire company shares are pending government approval. 

ArcelorMittal is also rumored to be interested in Tenaris SA (TS), an Italian steel-pipe producer.  Shares of Tenaris surged as much as 5% from $24.74 to $30.52 earlier this year on news ArcelorMittal was interested.

ArcelorMittal itself was formed after a bitter five-and-a-half-month battle between the Luxembourg-based Arcelor and Mittal Steel. The two came to terms last year, forming the world's largest steel enterprise, with a dominant 10% share of the global market.

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