Corus acquisition will impact Chinese steel market

Winning the Corus deal makes Tata Steel the world's fifth largest steel company. After nine rounds of bidding at 608 pence per share, Indian steel maker, Tata Steel won Corus in an all-cash deal. This deal will put combined capacities at 22 million tones per annum.

In accordance with this, analysts from Steel Biz Briefing, SBB, say that this deal will help Tata Steel catapult itself into the global industry.

They also say that the Chinese steel industry will continue to grow, and that China, not being a low cost producer, will not flood market with cheap steel. They believe that steel prices will be positive in 2007.

CNBC-TV18 shares with domain-b its exclusive interview with Patrick Flockhart, managing director, Steel Biz Briefing:

A lot of people have been saying good things about the deal and raising a few questions about the price. What is your own feeling about the strategic moves and the price at which it has come?
Let us look at the price first of all. As a very rough rule of thumb, Mittal paid about $720 per tonne of production for Arcelor. Another way of looking at this deal is that actually Tata has paid about $620 a tonne for Corus. So, yes, they had paid more as the multiple of EBITDA, but actually paid less per tonne of production that Corus is actually doing.

So in one sense, that is a good deal. I think that the price is possibly at the top end of some of our estimates, but it is still not an unreasonable price.