Well, this would be an interesting one for the anti trust authorities. If the world’s largest steel maker Arcelor Mittal were to take a controlling stake in one of the world’s largest iron companies, what kind of advantage would that give Mittal over their opposition? In a Reuters article today, it is reported by Goldman Sachs, the board of which he recently joined, that Lakshmi Mittal is considering taking a 9% stake in Rio Tinto, similar in size to that of Chinalco and Alcoa earlier this year. As the world’s largest steelmaker — controlling one of the world’s lowest cost iron ore producers — Mittal could control the delivered price of steel while distorting the cost base of his competitors. All the steel producers are scrambling to control their raw material costs by buying into producers or production assets; Mittal themselves recently increased their share in McArthur Coal to 19.9% at the same time that South Korea’s Posco took a 10% stake in the same firm. Macarthur supplies steel mills with more than a third of the world’s pulverized coal and had been the subject of rumors that one or more steel mills was trying to make a full takeover.
Mittal has a second option as far as Rio is concerned. Goldman believe anti-trust regulators would never allow BHP to hold on to all of Rio’s iron assets in the event that their battle for the company was successful, so the firm may bide their time and try to pick up the iron ore assets that BHP would be forced to dispose of.
Join the queue Lakshmi; there will be plenty of competition if they ever came on the block.