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ArcelorMittal Seeks Iron-Ore Independence.

Issued at 2010-09-17



ArcelorMittal, the world's largest steelmaker, plans to throw $4 billion at expanding its iron ore mines in a bid to mitigate the profit-squeezing effects of raw materials price inflation.

It's been a common theme in the industry worldwide since last year, as iron-ore prices rocketed higher on demand from the furious blast-furnaces of China. Then, in April, the world's biggest miners succeeded in forcing global steelmakers to jettison the annual contract pricing system in place in the iron-ore market since the 1960s, in favor of a short-term contract tied to the spot market. As such, raw materials costs for steelmakers have grown volatile.

ArcelorMittal

Above: ArcelorMittal's headquarters in the tax-haven of Luxembourg.


On Wednesday, the small U.S.-based producer, AK Steel, warned that the rising cost of iron ore on the world market would likely hurt its results even more than it had expected. AK said it had assumed a 65% rise in the global annual iron ore price on average for 2010. Analysts now believe that this year's average price will be double the levels seen in 2009. Unlike integrated steelmakers such as U.S. Steel and, to a lesser degree, ArcelorMittal, AK Steel does not control its own iron-ore mines.


Source: The Street



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