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22. June 2007

Arcelor Mittal to control 80% of its iron ore requirement

Arcelor Mittal, the world’s biggest steelmaker, plans to produce about 80% of the iron ore it uses within the next decade to protect itself against price increases from the three companies that dominate the market.

Mittal wants to boost supplies from the current 45% of the ore it uses by buying mines near its manufacturing facilities across the world, chief executive officer Lakshmi Mittal said on Wednesday at a steel conference in New York. Mittal is buying iron-ore facilities in Senegal and Liberia to counter the market power of BHP Billiton Ltd, Rio Tinto Plc and Brazil’s Cia. Vale do Rio Doce, which together control about 80% of the world’s iron ore and are boosting prices for the raw material used to make steel.

“We want to have a completely integrated business model,” Mittal said at the conference. High-cost new projects the iron-ore companies are developing will make it “difficult” for prices to decline substantially, he said. Steelmakers worldwide are seeking to secure their own supplies of iron ore after benchmark annual prices rose for a fifth consecutive year, reaching a record. Iron ore accounts for almost a quarter of the cost of making hot-rolled coil steel, the biggest single cost, according to Credit Suisse.

Mittal agreed in February with Senegal’s government to invest $2.2 billion in a project that will produce as much as 25 million metric tonne of ore a year.

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