New gamble of Arcelor Mittal in Liberia

June 4, 2008

June 4th (Commodity Online) – What is Arcelor Mittal’s latest adventure. According to reports, Arcelor Mittal has purchased the rights to develop the old Liberian-Swedish-American mining company Lamco’s facilities in Liberia.

According to The Wall Street Journal, the mine was closed in 1989 during the first of many civil wars and coups to blight the country in the 90s.

The why did Mittal buy this? If you can’t buy them, build them, seems to be the new mantra of steel majors now.

Mittal sees this as one component of a hub of West African mining operations strategically placed to feed both their European and North American steel mills.

The challenges are significant, since railway lines, bridges and roads have been lost over the last 20 years of strife.

Prospective miners will need to rebuild the infrastructure before they can move one tonne of iron ore. Project costs have already escalated from $900m to $1.5bn, and the mine isn’t due to start production before next year.

Still, no one doubts Mittal will succeed. The question on consumers’ lips is, will it make any difference to the price of steel?

Producers are already under fire for allegedly inflating price increases beyond what is necessary to cover rising raw material input costs.

Reports from suppliers to the North American industry support this view. The reports said many steel producers are on long term — by which they mean 3-7 year — iron ore contracts and the prices they are currently paying are significantly below the inflated world market prices paid on recently concluded contracts.

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