ArcelorMittal mining arm courts external customers

Thu Oct 13, 2011

PARIS Oct 13 (Reuters) - The mining division of ArcelorMittal is aiming to increase raw material sales to other steelmakers as part of its new role as a standalone business within the world's largest steel group, a company executive said on Thursday.

ArcelorMittal has stepped up mining investments in an effort to secure raw material supply, and the company published for the first time separate results for its mining operations as part of its first-quarter earnings statement this year.

"It's no longer where mining is a cost centre or a cost support, mining is a profit driver going forward, just as the steel side is," Simon Wandke, ArcelorMittal's chief commercial officer for mining, said.

"We don't have to supply all our tonnes to ArcelorMittal Steel," he told the annual World Steel Association conference. "We have contracts with global steel companies, a number of our customers are in the room today."

ArcelorMittal was taking a "portfolio approach" to mining assets, using a mix of acquisitions and partnerships to secure specific types of metal ore, he said, citing the takeover of Canadian miner Baffinland this year as giving access to high-quality iron ore amid declining global quality.

ArcelorMittal is aiming to raise its iron ore production by 10 percent this year and its output of coking coal -- another raw material used in making steel -- by 20 percent.

Mining activities have attracted increasing attention from industrial users as high commodity prices linked to booming Chinese demand have shifted some profitability upstream.

Wandke said his division was selling raw materials to external customers through separate commercial operations.

"Our growth is global and not just internal. So we have offices for mining around the world that have a different front door from steel."

He declined to give details about steel customers or pricing levels when asked by Reuters on the sidelines of the conference.

Mining major BHP Billiton told the conference mining projects should allow iron ore supply growth to outpace demand this decade after a period of undersupply that has stoked prices.

Wandke said that this rebalancing of supply and demand would take some time while projects come onstream.

"We think the market is going to remain pretty tight for a number of years."

(sourced Reuters)