In a presentation at AMM and WSD’s annual Steel Success Strategies conference in New York this week, Yuriy Ryzhenkov, CEO of Metinvest, said that “consolidation and change in the business model” are the only sustainable ways to fight global steel overcapacity and create value.
Ryzhenkov outlined two different types of consolidation: horizontal and vertical. Horizontal consolidation includes increasing market share, optimizing production capacities, and cutting overhead costs. Some examples of companies recently employing this type of consolidation are SSAB’s Ruukki acquisition, TATA SE’s plate mill divestment, ArcelorMittal’s ILVA acquisition and divestment of some EU assets, and ThyssenKrupp’s potential merger with TATA SE.
Vertical consolidation includes creating value through supply chain management, producing steel in low-cost countries, and making final products (including re-rolling) at the target market. One major example of recent vertical consolidation includes Metinvest’s acquisition of various re-rolling mills in the EU.
Ryzhenkov also mentioned the Section 232 tariffs, saying that the “losers” of the tariff policy will be end-user companies in the US. As an example, Ryzhenkov noted Harley-Davidson’s recent decision to shift production overseas in order to offset EU tariffs on US exports.