Steel Expands

ArecelorMittal eyes Macarthur Coal.


Think the global expansion is dead? Not in the steel sector.

ArcelorMittal is still on the march. The world's largest steel conglomerate, forged over the last several years by billionaire Lakshmi Mittal, has reportedly taken a 14.9 percent stake in Australia's Macarthur Coal in what could be the start of a $4 billion bid to expand its global reach.

The deal would be the latest extension of an ongoing bid for global dominance built on Mittal's hard-won $33 billion bid for rival Arcelor back in 2006. That deal, which set off a new era of consolidation for global steelmakers, also marked the start of a string of purchases by Mittal to control production costs by securing steelmaking supplies like coking coal and iron ore. Prices of such commodities have soared because of a global construction boom. Macarthur's coal could provide 15 percent of Mittal's coal needs.

The result has been a bit of a land rush in steel (see this Motley Fool story by Rich Smith on rival Nucor's fund-raising plans), and so far Mittal's strategy is paying off. Between 2006 and 2012, the company wants to raise its steel output by a fifth as it pushes into emerging markets around the world, including Africa, Eastern Europe, Asia, and Latin America.

The latest report comes on the heels of Mittal's bid to buy up the rest of its Brazilian partner, Inox Brasil, and its $740 million bid for several mines owned by Severstal, Russia's biggest steelmaker. Mittal's shares are up nearly a third this year, currently hovering near $100.

Yesterday, Deutsche Bank backed its "buy" rating on the stock with a $119 price target as the company continues to win higher steel prices. Deutsche Bank called Mittal's outlook "rosy."