Iron ore prices, negotiated annually between mining companies and steelmakers, will increase as much as 15 percent this year, Mittal said in an interview. Prices for the raw material climbed 72 percent last year. China imports almost half its iron ore.

"We are overplaying China," Mittal said. "They have so much scarcity of resources."

China's steel production has grown an average of more than 20 percent each year for the past five years as its booming economy fuels demand for cars, buildings and appliances. The country makes more than a third of the world's steel and depends on companies such as Brazil's Cia Vale do Rio Doce and BHP Billiton of Australia for most of its iron ore.

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The Chinese government is trying to dampen the country's growing steel industry to buoy prices that dropped 31 percent in 2005.

The Beijing-based National Development and Reform Commission said July 20 it planned to cut the number of producers to two by 2010.

There are currently about 260, the biggest being Shanghai Baosteel Group, which in 2004 made 21.4 million tonnes of steel, compared with Mittal's 59 million tonnes.

The commission, the top planning body, said March 15 it won't accept an increase in iron ore prices this year, the first time it has intervened in the annual talks between steelmakers and mining companies. Producers such as BHP, Vale and Rio Tinto Group are seeking increases of as much as 20 percent.

"China is the largest buyer and they want to contain their costs," Mittal said. "I don't know how far they will succeed."

Chinese iron ore imports increased 32 percent last year to 275 million tonnes. The nation accounts for about 43 percent of the global iron ore trade.

"The constraint in global steel is iron ore," said Peter Hickson, a London-based metals strategist at UBS AG, Switzerland's biggest bank. Iron ore price increases are unavoidable because of the shortage, he said.

Rotterdam-based Mittal Steel gets at least half of its iron ore from its own mines in Kazakhstan and Ukraine.

Arcelor SA, the Luxembourg-based rival for which Mittal is making a US$24.7 billion (HK$192.7 billion) hostile bid, buys almost all its raw materials.

BLOOMBERG