Monday, January 01, 2007

Where next for the steel Industry

2006 has proved to be a year of major changes within the world wide steel industry. The first half of the year saw the takeover of Arcelor by Mittal develop in to almost "soap opera" complexity, as claims and counter claims were exchanged by the various factions involved. Inevitably the shareholders got their way and the deal was concluded in the early summer, wresting control of the largest European steelmaker from French investors and institutions.

The rapid expansion of Chinese steelmaking capacity has continued to worry Western Steelmaker's. Ironically it was demand from China that fueled rapid price increases in 2005 and brought about a change in fortunes for many western steel manufacturers, many returning to profit for the first time in years. It could be somewhat tougher for them in 2007 as the capacity developed in China begins to have a real impact upon International prices.

Later in 2006 came the announcement of a bid for the UK/Netherlands based Corus group by Tata Industries of India. Whilst at the time of writing the emergence of a counter offer by Brazil's CSN has left some speculation about the final ownership of Corus, it is certain that the second largest European based steel manufacturer will slip away from Western ownership early in 2007. 

The large German based manufacturer Thyssen/Krupp remains independent, but their are more predatory steelmaker's around and as yet the newly revived Russian steel industry has yet to flex it's international muscle.

I am certain that 2007 will continue to see further consolidation within the steel industry, and that China, India, South America and Russia will continue to emerge as the leading world forces in steel manufacturing at the expense of Western Europe and North America.

To those of us involved in the manufacture and distribution of steel in the West, we must look upon the changes as a challenge to meet with the fortitude and ingenuity of the past, and not as a threat. Macro economic's dictates the inevitability of many of these changes in a shrinking world. As with so many other commodities, where manufacturing has shifted, there is room for advancement and economic activity in the improved distribution of products and the service levels to the end users.

Finally to all involved in the Steel Industry anywhere in the world, I would take this opportunity to wish you a prosperous New Year, and may you meet it's challenges successfully.

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