Mittal seeks 49 pct of China's Baotou Steel
(Reuters)
Updated: 2005-12-28 21:49

BETTING FOR THE LONGER-TERM

Mittal's shares traded on the New York Stock Exchange fell 0.92 percent on Tuesday.

The steel giant was also tipped to be interested in buying 49 percent of Kunming Iron and Steel Group in southern Yunnan province. Executives with Kunming Steel said they had talked with Mittal, but negotiations fell through over unspecified disagreements.

China's steel output has boomed alongside rapid economic expansion, and could grow 25 percent this year to 340 million tonnes, according to government figures. The world's biggest steel mills from Arcelor to South Korea's POSCO are now exploring opportunities to tap that demand.

However, steel prices in the country -- which consumes a quarter of global steel and is the world's biggest producer of the metal -- have fallen a fifth on average since April after peaking at a decade high in March, reflecting a growing domestic glut.

"They (multinationals) are betting on the long term," Liang said. "The market potential is still there, even though prices are getting soft."

Arcelor already holds 12 percent of an automotive steel venture in Shanghai with China's top steel maker Baoshan Iron & Steel Co. Ltd. and Japan's Nippon Steel Corp. . But it wants to further expand its foothold.

And POSCO, the world's fifth-largest player, is considering building a plant in southern China.

Baotou controls two listed firms: non-ferrous metal mill Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. Ltd., and Inner Mongolia Baotou Steel Union Co. Ltd.

($1=8.0740 yuan)