ArcelorMittal sees coal price rising 150-200 pct

By Steve James Posted 03 April 2008 @ 05:19 pm EET     Print     Reprint     E-Mail     Comments

The price of coking coal, a key ingredient in steelmaking, is expected to rise by 150 percent to 200 percent, driving up steel prices further, the head of the world's largest steel manufacturer, ArcelorMittal, said on Wednesday.

President and Chief Executive Officer Lakshmi Mittal also said the company sees global steel demand growing by 3 percent to 5 percent over the next decade, although demand in China will likely slow, with the slack taken up by India and other developing economies.

ArcelorMittal, which makes 9 percent of the world's steel, is well on its way to producing 150 million tonnes of steel per year by 2012 and expects to be 75 percent to 85 percent self-sufficient in raw materials by 2014-15, Mittal said.

His son, Aditya Mittal, the chief financial officer, told Wall Street analysts that demand from China's developing industrial infrastructure and other emerging economies had led to an average 7 percent growth in the steel market in the last seven years.

But steelmakers have been hit by big increases in the cost of raw materials such as scrap metal, which is soaring, and iron ore, which rose by 65 percent last month.

Coking, or metallurgical coal, another vital raw material, is also expected to rise in price.

"High (steel) prices are mainly driven by the costs -- energy pricing and the coal price, which is still to be decided in negotiations between the coal producers and the major customers," Lakshmi Mittal told Reuters during a break in the company's investor day.

"Negotiations are ongoing and the new benchmark price will be announced in a few weeks and then we will be able to pass it on to customers," he said.

Asked what size of increase in coal prices he was expecting, Mittal said 150 percent to 200 percent. He said the Europe-based company had recently raised its steel prices by as much as $150 per tonne as a result of higher iron ore prices.

During his presentation, Lakshmi Mittal said Chinese steel consumption was still strong. There were signs its growth rate was slowing, though he still anticipated it growing by 6 percent to 10 percent per year until 2012.

Also, he said, China's steelmaking industry was no longer a low-cost alternative, as costs there were also rising.

ArcelorMittal's strategy, he said, was to keep down costs by producing 110 million tonnes per year of its own iron ore by 2012. The company recently acquired three coking coal mines in Russia and had been allocated blocks of steam coal in India.

In addition, it has signed a memorandum of understanding with the government of Mozambique to acquire a stake in a coal mine there and also has expansion plans in Ukraine, Liberia, Senegal and Mauritania to secure more ore or coal.

But plans to boost iron ore production in North America have been hit by U.S. Steel Canada and Cleveland-Cliffs' decision to back out of an agreement to sell their stakes in Canada's Wabush Mines to ArcelorMittal.

ArcelorMittal has sued the two companies and the CEO declined to comment on the situation.