Mining News-Coal Mine and Steelmaker Industry Expand, Arcelormittal Agreed To Buy Second Appalachian Coal Company

Appalachian coking coal is proving ever more irresistible to the international steel industry.

Luxembourg-based ArcelorMittal, the world’s largest steelmaker, has agreed to buy its second Appalachian coal company in a month.

ArcelorMittal’s latest acquisition target, West Virginia’s Concept Group, owns some 57 million tons of reserves in the state. And those reserves, which produced some 800,000 tons of coal destined for coke furnaces and ultimately integrated steel mills, are located next door to Mid Vol Coal Group and its 85 million tons of coking reserves, which ArcelorMittal bought last month. Mid Vol produced 1.5 million tons of coal from West Virginia and Virginia mines last year.

“With raw material costs continuing to soar, increasing our upstream self sufficiency in primary raw materials is a critical component of ArcelorMittal’s growth strategy,” executive Sudhir Maheshwari said in a statement. “Concept’s proximity to Mid Vol’s operations means we can draw on the strengths of both companies to increase their combined production capacity.”

The price of U.S. coal used to make the coke that fuels the blast furnaces can go for as much as $250 a ton. Just last year, the cost was closer to $90.

Steelmakers already face pressure from customers — manufacturers that make everything from automobiles and aircraft to washing machines and refrigerators. Steel producers are doing everything they can to control soaring prices for iron ore, metallurgical coal and scrap steel.

The deal ArcelorMittal announced Monday is but the latest in a growing number of coal acquisitions by the steel industry, which increasingly sees owning its own sources of coal as critical to controlling soaring costs for scrap metal, fuel and other essentials.

ArcelorMittal recently upped its stake in Australia’s Macarthur Coal. Iron ore miner Cleveland-Cliffs picked off a smaller West Virginia and Alabama operator a year ago and just last week boldly bid nearly $10 billion for Abingdon, Va.-based Alpha Natural Resources. That deal gives Cleveland-Cliffs potential access to vast supplies of coking, or metalurgical-grade, coal across parts of West Virginia, Virginia, Kentucky and Pennsylvania.

International mining conglomerate BHP Billiton Ltd. is attempting a $170 billion takeover of rival London-based Rio Tinto Inc. and Korean steel giant Posco has bought 10 percent of Macarthur Coal. Russian steelmaker OAO Severstal is openly shopping for coal mines.



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