Possible consolidation in steel sector likely in 2010, say analysts

17 December 2008

The $800 billion steel industry may be on the verge of a new merger wave in which cash-rich majors look to swallow smaller rivals weakened by the global financial crisis.

The last decade has seen a series of mega-mergers in the steel industry, with Mittal buying Arcelor to create the world's biggest producer and India's Tata Steel taking over Europe's Corus.

Analysts say this process has created a more efficient industry structure, allowing it a swift supply response to the global credit crisis. Steelmakers across the globe have cut production sharply in the face of rapidly falling demand, to prevent prices from falling further than the 50 per cent they have plunged in the past four months.

Now, these experts opine that the next wave of consolidation may be just around the corner, with the second half of 2010 favoured by many to be the time of opportunity.

While Riva, the Italian steelmaker, has been mentioned as possible acquisition target, potential predators include Sweden's SSAB, and Finland's Rautaruukki and Outokumpu. Other possible buyers are giants US Steel and Thyssenkrupp.

As for the largest market for the metal, China, the country's Minister of Industry and Information Technology Li Yizhong said that he would encourage mergers in the iron and steel industry in a move to offset the adverse impact of the global financial turmoil.