ArcelorMittal to sell $1.1-billion stake in Canadian iron ore unit
ArcelorMittal, the world’s biggest steelmaker, will raise US$1.1 billion by selling a 15 percent stake in one of its Canadian iron ore operation. The funds will be used to help pay off debt at a time of sluggish demand, Reuters reported.
ArcelorMittal, which makes about 6-7 percent of the world’s steel, will sell the stake in ArcelorMittal Mines Canada to a consortium including South Korean steelmaker POSCO and Taiwan-listed China Steel.
It is the latest in a series of steps to raise funds as slow global economic growth and spending cuts in Europe dampen demand for steel used in the car and construction industry.
ArcelorMittal wrote down the value of its European business by US$4.3 billion in December and has had its credit rating cut to non-investment grade by all credit rating agencies.
Its net debt rose by US$1.2 billion during the third quarter to US$23.2 billion at the end of September.
The World Steel Association in October forecast steel demand would rise 2.1 percent in 2012, down from 6.2 percent in 2011.
ArcelorMittal Mines Canada operates two large open pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.
ArcelorMittal also owns the huge Mary River iron ore project in Canada’s arctic, in which it sold a 20 percent stake to joint venture partner Nunavut.
As part of the deal announced POSCO, China Steel and ArcelorMittal Mines Canada will enter into long-term iron ore supply agreements, ArcelorMittal said.
The group needs the funds to help compensate a slump in Europe, where demand is estimated to have fallen about 8 percent in 2012 and 29 percent since the start of the financial crisis in 2007.
ArcelorMittal has already announced the closure of blast furnaces in Belgium and France, with other operations on the continent also being temporarily idled due to overcapacity.
The Canadian deal will give POSCO, the world’s fourth-biggest steelmaker, increased access to iron ore. POSCO currently imports nearly all of its key raw materials and owns a 12.5 percent stake in Australia’s US$10 billion Roy Hill project.
ArcelorMittal is one of Canada’s top exporters of iron ore to steel markets around the world and its operations account for about 40 percent of Canada’s iron ore output.
The transaction is subject to approval from the Taiwanese government, and is expected to close in two instalments in the first and second quarters of 2013.