Surge in steel stocks

The iron men: All forge one and one forge all.

Shares in the three companies merging to form the world's largest steel producer jumped as trading in them resumed on Tuesday.

Arbed of Luxembourg surged more than 50% before falling back while Spain's Aceralia rose 35% and France's Usinor more than 5%.

The markets welcomed the merger but analysts say the real test will come when the European Commission reveals the conditions for the deal to be approved.

The new company will be based in Luxembourg with Aceralia holding 20.1%, Arbed 23.4% and Usinor 56.5%.

Usinor will pay 3.4bn euros ($3.1bn, £2.15bn) for the two companies in the all-share deal which offers investors a 56% premium for Aceralia and 57% for Arbed based on their average share price over the last three months.

Francis Mer ponders "a reduction in European employees"

Usinor Chairman Francis Mer acknowledged there would be "a reduction in European employees" at a news conference but gave no figures.

Analysts expect job cuts amongst the group's 110,000 workers for the projected savings of 700m euros ($638m, £442m) by 2006 to be met.

"The only thing you can adjust is the cost and the main element in the cost that you adjust is labour," said Peter Dupont, mining analyst at Commerzbank.

Other shares in the steel sector did not fare too well with both Anglo-Dutch firm Corus and Germany's Thyssen Krupp losing some of the gains made from the merger news.

The prospect of production capacity cuts in Europe from the merger pushed shares in the rivals up on Monday with Corus gaining 5.7% and Thyssen Krupp 3.9%.