Lakshmi Mittal has signalled a dramatic scaling back of ArcelorMittal’s ambitions to expand in China’s steel industry through an agreement to cut back the company’s stake in one of the country’s top metals producers.

The chairman, chief executive and main owner of the world’s biggest steelmaker had hoped to build up ArcelorMittal’s 30 per cent stake in Hunan Valin into a controlling shareholding but has been frustrated by Beijing’s refusal to loosen constraints over foreign ownership in the steel business.

Through an outline deal to reduce the Hunan Valin stake to 10 per cent over the next two years, ArcelorMittal is likely to gain about $300m, about $200m of which will be reinvested in increasing its operations in China in the more specialised segment of making high-value steel for the automotive industry.