Mittal-Arcelor merger worries China

Chinese steel industry has for the first time openly expressed concern over the merger of global steel giants, Mittal with Arcelor saying it posed "great challenge" for the domestic industry.

It also urged the government to raise the threshold to ward off foreign acquisitions in the world's largest market.

China should place tighter controls on foreign investment in its massive but fragmented steel sector, and make bolder moves to consolidate its steel makers into large groups, the China Iron and Steel Association said.

"The sector should be controlled by (Chinese) state-owned and privately owned steel makers, instead of foreigners, as it is one of the country's most important basic industries," vice-chairman of the association, Luo Bingsheng was quoted as saying by the China Daily.

Luo said the expected Mittal-Arcelor merger forced China's steel sector to speed up "trans-regional and trans-ownership" consolidations to form internationally competitive groups.

Mittal after the takeover has already expressed keen interest in China. He spent $338 million last October buying a 36.7 per cent stake in Valin Steel Tube & Wire Co Ltd, a Shenzhen-listed steelmaker in Hunan Province.

Earlier this year, Arcelor also clinched a deal to acquire a 38.4 per cent stake in Laiwu Steel Corp, a Shanghai-listed Chinese steel mill for $260 million. According to a national steel industry policy launched last year, foreign investors are banned from having a controlling stake in Chinese steelmakers.

Currently there are around 800 steel makers in China, but most of them are small.