Katrak, et. al. (2002) described a fragmented steel industry in 2000, which began in the 1990s, and predicted that consolidation will continue in all major steel producing and consuming areas; but argued that consolidation is not the same thing as globalization as evidenced by the fact that most steel companies that have ventured overseas largely managed their investments as separate entities.
Consolidation or globalization, the steel industry was not spared, thus mergers and acquisitions were prevalent (refer to Appendix P).
Figure 8: Emergence of Steel Companies with over 40 mtpy Capacity. Source: POSCO (2004)
Historically (IISI, 2007) American, German, Korean and Japanese steel firms have dominated the steel market. Later, however, referring to Figure 8 saw the emergence of European steel giants like Mittal Steel, Arcelor and Corus Group.
Hatch Associates (2001) observed that in the last 25 years the steel industry worldwide has invested $330 billion . . . for an overall return of 4%. Hatch Associates itemized that operating cost savings, R&D savings, globalization, cultural fit, product and market focus, asset utilization gains and access to technology are the motivating factors to consolidate steel investments. However, without due diligence what actually happens is value disappointment because operating cost savings are slow to realize, R&D savings have little impact, globalization adds complexity, the prevalence of cultural mismatch, product/market focus and asset utilization gains are difficult to achieve, and access to technology becomes limited.
Payne (2001) noted, moreover, a brisk and impressive pace of restructuring and consolidation for West European steel industry during the last several years prior to 2000 was juxtaposed with a lackluster progress in North America.
Weston (2002) wrote that U.S. deemed it unacceptable either for its steel companies to merge domestically or cross border to reduce costs fearing that a reduction in the number of U.S. steel companies would intensify oligopoly and reduce competition.
Woetzel (2002) observed that in 2000, there was an undersupply of world’s flat steel capacities particularly for hot rolled (1%), cold rolled (5%) and galvanized steel (2%), while there was an overcapacity for other steels—1% for plates and 12% for bar/rebar. Woetzel, moreover, expected that investment plans to offset the capacity shortage, and in some segments, will most likely exceed the increase in demand growth from 2000 to 2005.
Notes:
Katrak, Firoze E., et.al. (2002). Is Globalization “good” for the North American Steel Industry? Proceedings of American Iron and Steel Technology’s 2002 Steelmaking Conference. Boston, USA: Charles River Associates, 2002. p. 519. back to text
International Iron and Steel Institute (IISI) (2007), World Steel in Figures 2007, Brussels, Belgium: IISI, Committee on Economic Studies, 04 September 2007. back to text
Hatch Associates Ltd. (2001), Effective Due Diligence for Steel Capital Investment Decisions, Proceedings of the 4th Middle East Steel Congress, Crowne Plaza Hotel, Dubai: Hatch Associates, 27 – 30 May 2001, p. 12-13. back to text
Payne, Mark (2001), “Consolidation in EU steel industry — A global model?” USA: MBP Research, The Gale Group, Inc., 2001. back to text
Weston, J. Fred (2002), M&As As Adjustment Processes, Journal of Industry, Competition and Trade. CA, USA: 12 March 2002. pp. 18 back to text
Woetzel, Jonathan et.al. (2002), Transition in Asian Steel–The Ultimate Challenge or an Opportunity for Chinese Companies? Proceedings of First Far East Steel Summit 2002, Shanghai, China: October 21, 2002. back to text
