I spotted an intereresting and typically well written article in the Financial Times on the future of the global steel industry. The author Robert Miller considers the recent mergers (notably Mittal / Arcelor) and goes on to predict much further consolidation within the Industry.
What that is likely to mean in the long term for the steel consumer is likely to be higher prices.
The steel industry is consolidating. Some people believe the process is winding up. In fact, it is just beginning. The potential bid by India’s Tata for the Anglo-Dutch Corus is the latest example.
Mittal, Arcelor and Severstal fought the first battle in a global contest for supremacy. Mittal won. Casual observers saw its acquisition of Arcelor as an endgame, a “bottom of the ninth” inning scenario – to use a baseball metaphor. The combined group became the top steel producer in North America, Europe and South America, with three times the output of its biggest rival.
Arcelor Mittal’s ascendancy is deceptive, however. The group represents just 11 per cent of the world steel market. The top five steelmakers account for about a fifth. There is plenty of scope, and good reason, for more big deals. The consolidation game is far from over; we are only in the “bottom of the first” inning.
Within about five years there will be five to six steel giants – larger, more powerful companies with enough scale and resources to bring a new dimension of success to the industry. In time, the Mittal Arcelor deal will not loom as large.
Link to the full article below.