Recap and consequences of consolidations in steel industry

Recap and consequences of consolidations in steel industry

The steel industry worldwide has been suffering from oversupply problems during the recent years. Consequently, everybody in the industry along with governments and related industries are forced to follow the supply and demand changes pretty closely, as sudden changes effect the steel prices dramatically causing headaches and sleepless nights for everybody involved. The US administration has been addressing the oversupply problem in worldwide steel industry since second half 2001. The Bush administration was the first to bring in safeguard measures against imports of steel, in order to control the supply into its home market and provide the US mills with a safer and controlled environment. Other major steel markets of the world, the EU and China, have immediately followed the example and taken similar measures to protect their markets and control supply/demand balance. The Bush Administration has also been trying to encourage consolidation in the US steel industry for a healthier future. Major acquisitions have taken place in the US recently, introducing US Steel and ISG as huge steel groups controlling the flat rolled market in the US. Elsewhere, the process has already been going on for a while. The merger creating world's largest steel maker Arcelor, LNM Group's acquisitions of Sidex in Romania, Annaba in Algeria, Nova Hut in Czechoslovakia are the prime examples. US Steel have also been involved in acquisitions of Kosice in Slovakia, and Sartid in Serbia. Apart from those examples, the major European mills, even though they have no formal ties, acted in a disciplined way to control the production and supply in the EU market throughout last year, enabling them to control the prices as they wished. That was a proof of what consolidation offers to steel companies. For sure those results will be encouraging more mergers and acquisitions in steel industry. Those consolidations, and new ones to come, will be very important steps forward towards stabilizing the supply/demand balance throughout the world, and achieving a certain degree of price stability. That is, of course, a very much desired situation for the steel producers.