Credit Suisse First Boston CSFB says the South African arm of the Mittal Steel group is among the best assets in the world number one steel maker’s portfolio. The South African plants are among three “ultra-low-cost”, high-quality assets, according to the investment banking group’s initiation report on Mittal Steel last month.

The Newcastle plant in SA rates as the lowest-cost producer in the group at about $255 a ton of slab. The Vanderbijl- park plant is the third-cheapest producer at about $267 a ton. The global average slab cash cost is about $314 a ton. The South African operations are also considered good assets as they have a large amount of backward integration. Mittal Steel SA produces much of its raw materials and enjoys a favourable iron ore supply arrangement with Kumba Resources.

“Within the Mittal Steel portfolio, we see some real jewels in the crown,” says the report, naming South African and operations in Kazakhstan, Mexico, Algeria and Romania, among others.

In addition to its low-cost structures, Mittal Steel SA rates among the top assets in the group also because it has a share of about 72% of the domestic market. The global Mittal group has dominant domestic market shares in four other countries. These include Romania, Czech Republic, Poland and Kazakhstan.

The CSFB report is bullish about the global steel market. CSFB expects US steel prices to rise from the last quarter of the year, with prices in Europe increasing in the first quarter of next year. Prices in Asia would rise from the second quarter of next year, onwards, it says. “With the upside risk of a full-blown steel market recovery into next year, we believe momentum within the sector should be strong through at least early next year,” CSFB says.