ArcelorMittal optimistic on getting China steel stake

By Steve James

NEW YORK, June 24 (Reuters) - China must consolidate its steel industry before ArcelorMittal (MT.N) (ISPA.AS) could acquire a majority stake in a Chinese manufacturer, the head of the world's largest steelmaker said on Tuesday.

But when that happens, in perhaps five years, ArcelorMittal will be in a good position to be the first foreign-based steel company to do so, Chairman and Chief Executive Officer Lakshmi Mittal told reporters during a steel conference.

"I do not see that in a year or so, the Chinese government will change their strategy where they do not want foreign companies to have a majority control," he said.

"I still believe the Chinese government is focused more on regional consolidation - they want to consolidate China's steel industry first," he said on the sidelines of the American Metal Market's Steel Success Strategies conference.

"There are a lot of small companies who are inefficient, who are big polluters and are not viable.

"I would not be surprised if...in 2010 or 2012 we will see one Chinese company producing 80 million tonnes and more companies in the range of 50 million to 60 million," Mittal said. ArcelorMittal produces over 116 million tonnes of steel.

"Once that (Chinese) consolidation is done, perhaps at some point, in five to seven years times, we will see the Chinese government looking for global consolidation and maybe at that time we could be the first foreign company," Mittal said.

He noted that his company already had a presence in the country. The Europe-based company has a one-third ownership of mid-sized Chinese steelmaker Valin Steel Tube & Wire Co (000932.SZ), and a stake in Hong Kong-listed China Oriental Group Co (0581.HK).

But last year, a plan by ArcelorMittal to buy into Laiwu Steel Co (600102.SS) fell apart.

ArcelorMittal said the parent group of Laiwu, one of China's 10 biggest steelmakers, decided not to extend an agreement to sell 38.41 percent of the company to the global steel giant.

During his address to the New York conference on Tuesday, Mittal said China was in the process of building up its steel industry as it meets domestic demand. But it was not yet at the point where it was a net exporter. (Reporting by Steve James; editing by Carol Bishopric)