Mittal Steel, the world's largest steel maker, is weighing up its second deal in China in the past four months.
The group is in talks to acquire a 49 per cent stake in China's Baotou Iron & Steel, which is the maximum it can own under the country's rules on foreign ownership.
Mittal is among a number of companies leading the charge into the Chinese steel market, which is the biggest in the world. It spent $310m (£182m) on buying a third of Hunan Valin Steel Tube & Wire, the country's eighth-largest mill, in September.
Malay Mukherjee, Mittal's chief operating officer, confirmed the group was talking to Baotou after news of the negotiations leaked out in China. In a statement, the company said it was looking at a "possible participation" in Baotou.
The Inner Mongolian-based steel mill is government-owned and produced 5.4 million tonnes of steel last year. Mittal declined to speculate on how much the company was worth, adding: "It is too early to comment on the likely outcome of these discussions."
Mittal is focusing its acquisition firepower on China. Talks with Kunming Iron and Steel, in southern Yunnan province, recently fell though. A deal with Baotou would ramp up the pressure on Mittal's number two, Arcelor, which is trying to acquire a stake in Laiwu Steel in eastern China. South Korea's POSCO is also looking at opportunities to gain a foothold in China, possibly by building a plant in the country's south.
Chinese steel prices peaked at their highest levels for a decade in March, but have since slumped by one-fifth. The government recently embarked on a plan to consolidate the industry, forcing steel mills to merge or close.Reuse content