Slab supplies: the eye of a new acquisitions hurricane?..Georges Kirps – Eurometal

At the current time, CIS steel producers are largely oriented towards exports. The CIS countries produce 113 million tons of steel, whereas it consumes only 55 milllion tons of this total. Thus, exports account for 56 percent of CIS steel production. These figures underline the essential importance of exports for CIS steel producers - in particular exports to Asia and the Middle East. As China becomes a net exporter of steel, the CIS producers are expected to see a reduction in their shares of the Asian and Middle Eastern markets. Furthermore, in the long term, new Indian production capacities will put pressure on the Middle Eastern and south Asian markets. In anticipation of seeing their shares of the emerging markets fall, CIS producers are reorienting themselves towards developed markets such as the EU 25 and the North America Free Trade Agreement (NAFTA) countries. These markets have higher quality requirements which create additional challenges for CIS producers. In the EU, CIS producers face quota limitations on finished products while semis exports do not fall under any restrictions. However, in the world slab markets, CIS producers are facing tough competition from Brazilian producers, who seem to hold better cards in a number of respects than their CIS counterparts: they are on the high side as regards prices but on the low side in terms of costs. The respective advantages and disadvantages of the CIS and Brazilian producers may be expressed as follows; CIS producers: potential for excess production capacity in future, low costs but structural weaknesses influence slab costs, sometimes difficult access to ports, no WTO membership. Brazil: operational cost advantages, role in deciding prices, easy access to raw materials, sophisticated export facilities, very competitive slab costs. To secure their market position, CIS producers are targeting acquisitions of rolling mills, mainly in the EU and NAFTA, hoping thereby to consolidate slab output and add value to their semis exports. The CIS producers are emerging as potentially strong players in the worldwide game for mergers and acquisitions, investing more and more in downstream manufacturing. In Brazil, iron ore rich groups are strong drivers in the slab-for-export race. Exporting slab in place of iron ore seems to be the strategic avenue chosen by the Brazilian mining groups and steel producers. Georges Kirps Eurometal