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    Arcelor-Mittal :

    Mittal Steel and Arcelor, the world's two biggest steelmakers, are edging towards a merger deal, with the groups locked in what Mittal said Friday were "constructive" talks.

    "We can confirm that we are in advanced and constructive discussions with Arcelor which may or may not lead to a recommended transaction," Mittal said in a statement.

    "We remain committed to enhancing value for our shareholders," Netherlands-based Mittal said.

    In a move to secure Arcelor's final backing, Indian-born steel tycoon Lakshimi Mittal's company is expected to lift its bid to about 43 euros a share from its current cash-and-shares bid, the French daily La Tribune reported Friday.

    This stood at 37.74 euros (47.50 dollars) when it was unveiled last month.

    Increasing its offer would represent the second time that the Mittal group has been forced to raise its bid since launching its hostile takeover push in January. Last month it lifted its offer by 34 per cent.

    A new Mittal offer could bring to an end to the long-running takeover battle for Arcelor with Arcelor's board due to hold a crucial meeting Sunday when the group has said it will finally decide between its two rival suitors.

    Last month, Arcelor unveiled a 13-billion-euro merger plan with Russian steel magnate Alexei Mordashov's Severstal group as part of a plan to fend off Mittal.

    Since then, however, signs of a shareholder rebellion have emerged over the Arcelor plan to team up with Severstal.

    Sources close to the Mittal-Arcelor talks say the two sides have so far failed to agree on the value of Arcelor but have decided to call the new merged group Arcelor-Mittal.

    Arcelor has placed a 44-euro-a-share value on itself as part of a 6.5-billion-euro share buyback scheme the company has announced. It also said that it would not consider any offers below 40 euros.

    Under the deal, the two companies are attempting to hammer out, Mittal might also be forced to accept a minority holding in the new merged entity.

    Combining the two steel giants could also involve the new company retaining Arcelor's Canadian offshoot, Dofasco Inc.

    Arcelor bought Dofasco for 5.6 billion Canadian dollars (4.8 US dollars) just shortly before the Mittal bid was unveiled in January after seeing off giant German steelmaker Thyssen Krupp in a fierce takeover battle to acquire the Canadian group.

    Mittal had previously flagged plans to sell on Dofasco to Thyssen Krupp if it is successful in the power play to acquire Arcelor.

    Instead less profitable company operations in Algeria, Serbia and South Africa are likely to be hived off, sources said.

    Arcelor chairman Joseph Kinsch is expected to remain chairman of the board of directors of the new merged group up until his retirement 2007. Lakshmi Mittal is likely to act as co-chairman until Kinsch's retirement.

    The speculation that Mittal might raise its bid for Arcelor also follows the decision this week by Severstal to improve its merger offer to address Arcelor shareholders' concerns about its control of the new fused group.

    In a direct appeal to Arcelor shareholders, Mordashov on Friday published full-page advertisements calling on them to endorse the merger amid signs of the growing unease.

    An extraordinary meeting of Arcelor shareholders has been called for next Friday to consider teaming up with Severstal.

    However, a Luxembourg court said Thursday it would rule next week on whether the meeting can proceed.

    The court case has been mounted by a group of Arcelor shareholders concerned about the procedures involved in arranging next Friday's meeting. The Mittal offer expires on July 5.

    Mittal, Arcelor in 'advanced' merger talks

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    BHUBANESWAR, India (Reuters) - Mittal Steel, the world's No. 1 steel firm, said on Friday it was negotiating with Orissa to set up a 12-million tonne steel plant at the cost of at least 300 billion rupees ($6.5 billion).

    Chairman Lakshmi Mittal, fresh from a bruising $32.5 billion takeover battle where he won control of rival Arcelor, has no foothold in India's steel industry.

    The Indian-born billionaire said the proposed plant, to be built in two phases, would be situated in the mineral-rich state of Orissa.

    "The focus areas for us would be India and China to (help) continue Mittal-Arcelor to be the largest steel producer of the world," Mittal told reporters.

    Steel demand in India, Asia's third-largest economy, is expected to surge on the back of sizzling growth in the automobile, housing and real estate sectors.

    Construction activity is on the rise in the country which is investing heavily in improving overburdened infrastructure.

    Forecasts of India's GDP expanding 7 percent each year in the next couple of years and domestic steel consumption of just 33 kg per capita, compared with 200 kg per capita in China, is prompting many firms to announce fresh investment and expansion in the country.

    Mittal, one of the five richest men in the world, said the investment would be in the range of 300-400 billion rupees.

    Mittal Steel also had plans to set up a $9 billion steel plant in neighbouring Jharkhand, but Mittal said he was unhappy with the slow pace.

    "The Jharkhand project is going slow. I am not very happy with the progress in Jharkhand. We will sign the MoU (memorandum of understanding) with the Orissa government soon."

    Sourcing raw materials would not be a problem in Orissa which is a storehouse of iron ore, bauxite, nickel and coal, the state's chief secretary Subhash Pani told Reuters.

    "We want value addition for sharing our mineral resources," Pani said.

    South Korean steel maker POSCO is also planning a $12-billion steel plant in Orissa.

    Mittal Steel plans $6.5 bln Indian foray

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    Good news for Annaba?

    The world's largest steel company conducted an experiment in Superior this week that might lead to regular overseas iron ore shipments from the Burlington Northern Santa Fe dock.

    Mittal Steel loaded 24,500 tons of Hibbing Taconite ore onto the Bahamian ocean vessel Goviken at the BNSF terminal in Allouez. Mittal, majority owner of Hibbing Taconite, is transporting the ore to its integrated blast furnace and steel mill in Annaba, Algeria.

    The vast majority of international carriers, or "salties," that load in Duluth-Superior carry grain as their cargo. The transportation of iron ore is highly unusual, although there's a growing worldwide market fueled by growing demand for steel.

    "I think it's a big deal," said Prof. Peter Kakela of Michigan State University, an iron industry analyst.

    China is among countries that previously have purchased Iron Range ore. In one case, pellets from U.S. Steel's Minorca mine were transported by rail to British Columbia before being transferred to an oceangoing vessel. Taconite also is being transported through the Great Lakes to Labrador, where it's exchanged for Canadian ore and shipped by sea to China. But shipping directly overseas to Algeria is "a first," according to Dan Sydow, manager of Fedmar International, the Goviken's Duluth-based vessel agent.

    Mittal is interested in having a second iron ore source in Algeria, he said Thursday. This week's shipment aboard the 730-foot Goviken - which is the maximum-size vessel that can fit through the Welland Canal to bypass Niagara Falls - was a test of several capabilities. According to Sydow, Mittal wants to determine:

    If the vessel could be loaded at BNSF without complications. He said there were no problems.

    Whether it can be unloaded without problems in Algeria, which won't be known until the vessel arrives.

    Whether Hibbing Taconite's iron ore pellet is compatible with the Annaba blast furnace.

    Compatibility is a key factor, said Frank Ongaro, president of the Iron Mining Association of Minnesota. To properly mesh, the Hibbing Taconite pellet must contain the proper mix of iron coke.

    Beyond those factors, transportation costs will play a key role in whether Mittal continues to export pellets from the Iron Range to Algeria, Kakela said. The company already has an advantage. It's buying pellets at actual cost from its own mine rather than paying "sky high" world market prices, he said. That price is about $45 per long ton versus $75 from another supplier at the mouth of the St. Lawrence Seaway system.

    Transportation from Superior to the Atlantic Ocean could add about $10 per ton, but that's about $10 per ton less than transporting the cargo aboard a domestic vessel, he said, because crew wages are lower, providing Mittal an additional advantage.

    If the test proves successful, "they're talking about a couple of shipments a month" next year from BNSF, Sydow said.

    "If someone told me two years ago that we'd be loading iron ore for Algeria, I'd say they had to be wrong - they must be talking about grain," said Ron Johnson, trade development director at the Duluth Seaway Port authority. But given the growing demand for steel in developing countries like China, "It's a changing world out there."

    Iron Range ore headed overseas to Algeria

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    Another shipload of taconite soon will leave the Twin Ports, destined for Algeria.

    Dan Sydow, manager of Fedmar International, said the Federal Yukon was scheduled to begin loading pellets at the Burlington Northern Santa Fe ore dock at2 a.m. today. There, the 656-foot ship will receive 23,500 tons of taconite from Hibbing Taconite. The Canadian vessel will top off its load at the east end of theSt. Lawrence Seaway, setting sail for Algeria with about 35,000 tons of pellets onboard.

    The Federal Yukon will deliver the second-ever shipment of Minnesota taconite pellets to an Algerian steelmaker. About two weeks ago, the Goviken, a 729-foot saltie, also loaded pellets at the BNSF dock in Superior. It is expected to arrive in Algeria any day, Sydow said.

    Sydow said Mittal Steel has orders in the pipeline for an additional five shiploads of HibTac pellets to be sent to Algeria this year.

    If the pellets are to Mittal's liking, more business could follow.

    Second load of ore pellets to go overseas to Algeria

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