China Oriental in multi-billion-dollar supply deal with ArcelorMittal

BEIJING: Steel giant ArcelorMittal has agreed to supply a Chinese producer with iron ore and coking coal under a multi-billion-dollar pact lasting through 2010, the China Oriental Group announced Tuesday.

The supplies will be at prevailing market prices, and are estimated to be worth more than 14.6 billion yuan (2.1 billion dollars), China Oriental said in a statement to the Hong Kong Stock Exchange.

China Oriental said its directors have proposed that the value of iron ore to be purchased by the group from ArcelorMittal be capped at 1.1 billion yuan this year, 3.3 billion yuan next year and 4.2 billion yuan in 2010.

The value of coking coal that is to be purchased from ArcelorMittal is to be capped at 800 million yuan this year, 2.2 billion yuan next year and 3.0 billion in 2010.

China Oriental uses iron ore and coking coal as major raw materials for production of iron and steel products.

The company noted that global demand for raw materials has been on an uptrend, due mainly to a surge in demand in China.

"With the assistance of ArcelorMittal, the group can ensure a steady supply of raw materials which is crucial for the group's existing production and business expansion needs," it said.

China Oriental did not say anything in its statement about ArcelorMittal's proposal to increase its interest in the Chinese firm.

ArcelorMittal currently owns about 30 percent of China Oriental. It proposed last December to raise the stake to 73 percent.