POSCO, Asia's third-biggest steel maker, has agreed to pay about A$424 million (US$408 million) for a 10-percent stake in Macarthur Coal after ArcelorMittal boosted its stake in the Australian producer.

Posco will pay A$20 a share, pending board approval, Ko Min Jin, a spokeswoman for the Pohang, South Korea-based company, said yesterday. ArcelorMittal, the world's biggest steel maker, paid the same amount per share to increase its stake in Brisbane-based Macarthur to 19.9 percent, the most allowed in Australia without making a takeover offer, Bloomberg News said.

Posco and ArcelorMittal are battling to secure supplies from the world's largest exporter of pulverized coal, joining China's Citic Resources Holdings as the company's three largest shareholders. Macarthur's shares fell 6.3 percent on concern the purchases may thwart any takeover attempt.

"You have got three buyers and you've got three blocking stakes," Michael Birch, of Wallace Funds Management in Sydney, said.

"There is still a lot of uncertainty about what the various parties are after."

Macarthur fell A$1.13 to A$16.87 at 4:10pm Sydney time close on the Australian stock exchange yesterday, valuing the company at A$3.6 billion.

Posco shares rose 2.1 percent in Seoul trading.

Facing a shortage

ArcelorMittal will continue buying raw material producers because the world is facing a steel shortage as demand accelerates, the company's Chief Executive Officer Lakshmi Mittal said last week.

Posco and ArcelorMittal, Macarthur's largest customer, both bought the shares from former Macarthur director Ken Talbot. ArcelorMittal bought 10.6 million shares, or 5 percent of the stock, from Talbot, the Luxembourg-based company said. It takes ArcelorMittal's total investment in Macarthur to A$843 million.

Citic owns 17.66 percent of Macarthur and last July bought 15.6 million shares at A$7.20 each from Talbot, Macarthur's founder. The sales leave Talbot with about 4.8 percent of Macarthur's stock. The acquisition is "in line with ArcelorMittal's strategy of securing its supply of raw materials, in this case through the acquisition of a stake in a leading supplier of pulverized coal, ArcelorMittal said. Pulverized coal is used by steel makers as a cheaper alternative to coking coal.

"The decision is to secure raw materials, not for M&A," said Ko, the spokeswoman for Posco.

Posco has said it aims within 10 years to secure 30 percent of its raw material supply from mines that the company invests in, up from 17 to 18 percent.

Posco imports 600,000 metric tons of coal a year from Macarthur.

Macarthur's shares dropped the most in three months on June 25 after ArcelorMittal pulled out of takeover talks. The mill had bought a 14.9-percent stake last month at A$19.96 a share.

ArcelorMittal increasing its stake "doesn't change anything," Macarthur Chairman Keith De Lacy said. "We've got no talks going on with them."