ArcelorMittal, the world's largest steelmaker, aims to boost iron ore production from its own mines by over 50 percent in the next five years, the company's head of mining said on Wednesday.
The increase will come from an "optimization" of the company's mines around the world to produce more efficiency and make ArcelorMittal more self-sufficient in key steel-making raw materials like iron ore and coking coal.
"We would like to achieve iron ore production of the order of 100 million tonnes (per year) in 2015," Peter Kukielski told the Reuters Global Mining and Steel Summit. Currently, ArcelorMittal mines produce 60 million to 70 million tonnes.
"Our goal is to expand our level of self-sufficiency (in iron ore) to the order of 70 percent or so," Kukielski said.
Europe-based ArcelorMittal has steel-making operations around the world and reached its No. 1 status to some extent by avoiding buying on global ore and coal markets.
"For some time now it has been the company's strategy to integrate backward into mining because of the volatility of raw material prices and supply," Kukielski said.
Asked about the iron ore benchmark price currently being negotiated by major suppliers and steelmakers, he said there was "no doubt there will be a substantial increase."
He gave no figure, but with spot iron ore prices trading at double last year's contract price, analysts are looking for rises from 65 percent to 80 percent.
Kukielski said although ArcelorMittal would never preclude potential mining acquisitions, he nevertheless spent more of his time "trying to optimize the assets that we have.
"There are certain of those mines that have such a large resource base that they are crying to be expanded.
"We have assessed all of our mining assets and done life-of-mine planning."
"SCREAMING TO BE EXPANDED"
As an example, he cited QCM in Canada, with production around 14 million tonnes. "With a few tweaks here and there, we'll get it up to 15 million tonnes in the next two years. It's screaming to be expanded."
Kukielski said the company was also focusing on iron ore and coal mines it operates in the former Soviet Union -- one in Ukraine, 12 in Kazakhstan and three in Russia, plus an iron ore mine in Bosnia.
"There were inefficiencies in the system because the Soviet model was to just employ as many people as possible.
"A lot of it gets done through attrition, but we will certainly find ways to optimize employment structures in our mines all over the world."
Coincidentally, last year's recession helped the company in its mine restructuring. "I wouldn't say something as strong as 'a blessing in disguise,' but it did force many companies to take a look at their efficiencies and their inefficiencies.
"Three or four years ago, during the really good times in the mining cycles, everybody was saying: 'We need to get our costs down now, so we're ready for when times change.'
"Nobody did, because everybody threw money at production," said Kukielski, who is also a member of ArcelorMittal's group management board.
"So there's nothing like a crisis to force you to do what you should have done years before.
"And now that we've done a lot of that and cut out the fat we are absolutely determined to sustain the cost efficiencies that we gained during that period."
Source: Reuters