The world's largest steel company Arcelor Mittal will have to offer a higher price of its 38 percent stake in China's Laiwu Steel Corporation, after the country's regulatory authority refused to approve the current offer, the China Securities Journal reported on Tuesday.

 

The National Development and Reform Commission said Arcelor had underestimated the value of Laigang Group, the controlling shareholder of Laiwu Steel.

 

"The scheme for equity transfer is so far still under examination by related government authorities," said an unnamed source with Laigang Group, insisting that 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 percent of Laiwu Steel's equity at 5.888 yuan (about US$0.736) per share.

 

The Shanghai-listed Laiwu Steel closed at 13.34 yuan on Monday.

 

Arcelor will own 37.326 percent 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.

 

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 percent by 2020.

 

Reports have said that Laigang Group may merge with another steel manufacturer in the region to form a giant company with an annual output of over 20 million tons in east China's Shandong Province.

 

(Xinhua News Agency March 14, 2007)