ArcelorMittal not to quit India projects

ArcelorMittal not to quit India projects

Brussels: ArcelorMittal, the world’s largest steelmaker, said on Monday it remained committed to building steel plants in India, but could abandon existing plans and look for a different site.

“We remain fully committed to India," a spokesman for the group said, though ArcelorMittal needed to keep its options in the country open.

The Financial Times reported on Monday that the group was close to pulling out of a $20 billion plan to build two large steel plants in the states of Jharkand and Orissa.

The group’s chairman, Lakshmi Mittal, told the paper in an interview that delays in persuading farmers and others to sell the land ArcelorMittal needed for the development were unacceptable and that it might look for other places in India for its expansion.

“This is just about building up a better bargaining position versus local authorities. The Mittals are committed to building business in India but they have trouble with land ownership," Commerzbank analyst Dirk Nettling said.

Another analyst also said the group was just flexing its muscles, hoping to secure ownership of the land swiftly.

“(Mittal) does want to do something in India. But it has been difficult to secure the land, just like it was for Tata," the analyst, who declined to be named, said.

Tata Motors Ltd had to move the factory for its low-cost Nano car out of West Bengal last year after violent protests by farmers who lost land forced it to stop construction.

Meanwhile, the steel company expects steel demand to recover next year, but the industry is in for a bumpy ride in 2010, its chairman told the FT in an interview.

“I am optimistic about the emerging economies (in terms of steel demand). But I am cautious when it comes to the industrialized world," Lakshmi Mittal, who is also the group’s chief executive, said.

Mittal stuck by his previous forecast of a 10% rise in global steel demand next year.

“My overall feeling is that, next year (in the steel industry), we will still be in for a bumpy ride," he said.

Mittal has said he expects domestic demand in China to rise by more than 15% this year, with demand cooling in 2010.

Output in China would probably carry on growing in 2010, but by only 5%, Mittal said.

Prospects for a world steel industry rebound could be blown off course by a strong rise in exports from China, Mittal said.

“We have to monitor this (net exports) because they could have a negative influence on what happens in the rest of the world," the Financial Times quoted Mittal as saying.

The global downturn has forced ArcelorMittal and rivals to run at half capacity in the first half of 2009 with spot prices down 60%, while destocking has exacerbated the problem.

Demand and output in the United States, western Europe and Japan could fall by as much as 35% this year and then come back in 2010 by perhaps 15%, Mittal said.

ArcelorMittal shares gained as much as 2.6% to €24.35 on Monday after HSBC initiated coverage of the steel maker’s shares with an “overweight" rating and a $46 price target.

At 1055 GMT they were trading up 1.75% while the DJ Stoxx European basic resources index was up 1.9%.

“We believe production will accelerate faster than expected," HSBC said in a note to clients.

SNS Securities initiated coverage of ArcelorMittal with a “buy" rating and a €33 target price, saying the share was undervalued.

“ArcelorMittal is the number one global steel manufacturer. But it is also a major miner with substantial iron ore reserves, which is not reflected in its current valuation," SNS said.