Beijing: Amid domestic concerns about foreign giants acquiring key state assets, China has asked Arcelor Mittal to pay more for a higher stake in Laiwu Steel, insisting that the global steel giant has "underestimated" the value of Laigang Group, the controlling shareholder of Laiwu Steel.
Arcelor Mittal will have to offer a higher price of its 38 per cent stake in China's Laiwu Steel Corporation, after China's top planning body refused to approve the current offer
The National Development and Reform Commission said Arcelor had underestimated the value of Laigang Group, the controlling shareholder of Laiwu Steel, the state-run China Securities Journal reported.
"The scheme for equity transfer is so far still under examination by related government authorities," the paper quoted an unnamed source with Laigang Group as saying.
The source, however, insisted that the commission's response is part of "normal procedures" and confirming that Laiwu Steel is still in talks with Arcelor Mittal.
Arcelor China Holdings (Luxemburg) inked the purchase contract with Laigang Group on February 24, 2006 to buy 38.41 per cent of Laiwu Steel's equity at 5.888 yuan (about $0.736) per share.
Arcelor will own 37.326 per cent of Laiwu Steel according to amendments to the original purchase contract, making the two parties the company's largest shareholders.
The two parties signed a supplementary agreement this January to extend the equity purchase contract to September 30, 2007, more than eight months after the submission of the deal to the government authority.
Last week, it emerged that Arcelor Mittal was unsuccessful negotiating an agreement to buy a stake in mid-sized Baotou Iron & Steel, located in north China's Inner Mongolia.
Talks with Baotou collapsed because the Mittal wanted a stake of 50 per cent or more in the company, but government policies require the state to keep a controlling share in such industries, Baotou's chairman, Lin Donglu said.
Baotou may also seek local partners, including Shanghai-based Baosteel, China's biggest steel mill, Lin said.
Industry sources said Mittal also is reportedly in talks with Kunming Iron & Steel Co., the biggest steelmaker in southwest China's Yunnan Province. However, it is not clear if the Chinese government is keen to allow Arcelor Mittal to increase its grip of the Chinese steel market.
At the ongoing session of the National People's Congress (NPC), China's parliament, several deputies urged the government to exercise caution while allowing foreign companies into key sectors like steel.
China's steel industry is currently restructuring to consolidate the sector's productivity.
Under the NDRC's development policy, the country's top ten producers are expected to produce half of China's steel by 2010, and 70 per cent by 2020.
Meanwhile, China exported 8.75 million tonnes of steel products in the first two months this year, up 139.3 per cent year-on-year.
The country's steel billet export soared 87.9 per cent year-on-year to hit 1.12 million tonnes in the January-February period, according to latest Chinese customs figures for January and February.
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