“A group led by China Steel Corp. and Posco (005490) agreed to pay $1.1 billion for 15 percent of ArcelorMittal Mines Canada Inc. to secure supplies of iron ore from two mines.
China Steel (2002) will take 3.68 percent for $270 million, Steve Lee, executive vice president atTaiwan’s biggest steelmaker, said today by phone. Posco didn’t say how much it will pay.
The deal gives the group access to mines producing about 40 percent of Canada’s iron ore, according to ArcelorMittal’s website, as the cost of the raw material rises faster than steel prices. ArcelorMittal, the world’s largest steelmaker, is studying selling about 30 percent of the unit to try to reduce its debt, a person familiar with the matter said on Oct. 20.
“If you look at the steel companies and their performance to date, it’s very difficult to improve bottom line earnings if you do not have a low enough iron ore input cost,” said Vanessa Lau, an analyst at Sanford C. Bernstein & Co. in Hong Kong.
Posco and China Steel will agree long-term iron ore off- take agreements proportionate to their interests in the venture, Kaohsiung, Taiwan-based China Steel said today in a statement on its website. Other members of the group are “financial investors,” the company said without elaborating.
Kim Ji Young, a spokeswoman for Posco, the largest South Korean steelmaker, didn’t say how much the company will invest….”
If you enjoy the content at iBankCoin, please follow us on Twitter
