Heavy Mittal's U.S. Tour

The (steel) king is dead. Long live the (steel) king! Yesterday saw the NYSE debut of the world's newest (if in name only) and soon-to-be-largest steel maker, Mittal Steel (NYSE: MT  ) .

As we discussed back in October, Mittal Steel is the fiefdom of steel magnate and "richest man in Britain" Mr. Lakshmi Mittal. It was formed on Friday, when his Ispat International bought out private LNM Holdings -- another of Mr. Mittal's steel companies. The result of this merger is the above-mentioned Mittal Steel, which sometime next quarter will consume America's International Steel Group (NYSE: ISG  ) . At that point, the three-headed behemoth will become the world's largest steel maker, accounting for 32 million metric tons of production annually.

Who needs that much steel? Well, Mittal counts among its customers some of the world's biggest consumers of the metal: automakers Ford (NYSE: F  ) and General Motors (NYSE: GM  ) are two; appliance makers Maytag and Whirlpool (NYSE: WHR  ) are two more.

As big as Mittal is -- and as staggeringly large as its production numbers are -- the company has a tiny price-to-earnings ratio at just a hair over 5. Parts one and two of this soon-to-be tripartite company earned a whopping $7.60 per share last year against a share price that currently stands at just $39.50.

In the U.S., Mittal's biggest competitors are two names well known inFooldom, Nucor (NYSE: NUE  ) and the venerable U.S. Steel (NYSE: X  ) . In comparison with those two, Mittal is selling for a pretty sizable discount, especially when you consider its dominance in the steel market. Mittal already sells as much steel as Nucor and U.S. Steel combined, and when it folds in International Steel Group early next year, Mittal will outmass its two largest U.S. rivals by 30% in annual sales. But its P/E of 5 is roughly half the P/Es sported by its competitors.

That's a pretty good size margin of safety, if only a relative one. While we can't know exactly when, we all know a downturn in the steel market is inevitable. And when that downturn comes, a Fool who just couldn't fight the urge to own a piece of the rising profits of this industry is probably going to be better off holding a cheaper market dominator like Mittal than one of its smaller and pricier U.S. rivals.

Refine your knowledge of the steel industry with these stainless articles:

• Heavy Mittal
• A Steel Arbitrage Opportunity
• Steel Giant Awakens
• Steel Is Still a Steal
• Steel Soars

Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.