PARIS, Dec 20: Arcelor Mittal, the world's leading steel maker, signalled its intention to pursue global steel sector consolidation on Wednesday, as it announced plans to acquire a Mexican producer and was reported to be interested in a Russian company as well.
Arcelor Mittal, formed five months ago in the merger of Mittal Steel and European producer Arcelor, said it would buy Mexican long steel manufacturer Sicartsa for $1.44 billion (1.1 billion euros).The company also announced the creation of a joint venture with the parent company of Sicartsa, Grupo Villacero, for the distribution and sale of its products in Mexico and the US southwest.
“This acquisition creates a strong and well-balanced long carbon player in the Americas,” said Arcelor Mittal chief financial officer Aditya Mittal in a statement.
“With the Mexican market expected to grow by up to 6 per cent per year over the next 10 years this is the ideal time to expand our presence in the country.” Sicartsa, which has production sites in Mexico and Texas, had sales of $956 million in 2004 and has an annual capacity of around 2.7 million tons.
Acquiring the Mexican group will also give Arcelor Mittal access to 160 million tons of iron ore, a critical step in its bid to become 64 per cent self-sufficient in raw materials in 2010.
News of the purchase cheered investors, with shares in Mittal Steel, as the company is known on the Paris exchange, up 2.11 per cent to 31.89 euros in late-morning trade on an overall market that was 0.60pc stronger.
Analysts at brokers JP Morgan said that while steel prices were weakening they were expected to rebound and boost producer profits.
In another development on Wednesday the Russian daily newspaper Vedomosti said Arcelor Mittal had made an offer for a controlling stake in Russia's second-biggest steel producer MMK (Magnitogorsky Metkombinat).
Aditya Mittal, who is also the son of company chief executive Lakshmi Mittal, visited the Russian firm's base in Magnitogorsk in the Ural Mountains to discuss the possible purchase, the paper said, citing sources close to MMK.
But Mittal is viewed with suspicion in Russian business circles and the Kremlin might not give its backing to the company buying a stake in MMK, the paper added.
Both Arcelor Mittal and MMK declined to comment on the reports.
Depite the mammoth size of Arcelor Mittal, which produces 110 tons of steel a year or three times more than its nearest competitor, the global steel sector remains highly fragmented.
But a drive to consolidate is under way. Oregon Steel of the United States has been bought by Evraz of Russia, while Tata of India and CSN of Brazil are in the midst of a takeover battle for Anglo-Dutch producer Corus.
Arcelor Mittal has also made clear it wants to beef up its presence in China and India, where Lakshmi Mittal was born. Steel consumption in both countries is projected to surge in the coming years. —AFP