Steel Industry Mergers

By: EconomyWatch   Date: 30 June 2010

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Steel Industry Mergers have become inevitable in the steel industry in the entire world. The need for such an action has arisen due to the accumulation of excess capacity in the steel industry. This over capacity has taken place after the most rewarding years to the steel industry when the percentage of profit rose to around ninety percent. But this pursuit for more and more profit led them towards over production which consequently led to glut and remained unsold. Thus, the need of the hour is to dispense off this excess produce. That is why Steel Industry Mergers have become that much more important.

The real heat of this over production is being faced by the small players in the market who are finding it difficult to remain viable. This is bringing huge opportunity for the big players to acquire these small players at most cost effective prices.

MThe most important fact that has come into the fore is the market share that has been controlled by the first five top most companies. It has been observed that the fragmentation in the steel industry all over the world is a highly fragmented one where the first five top most steel companies have market share of only twenty percent. Thus, the rest 80 % steel market is being fed by the small and largely fragmented local steel firms. Hence, the consolidation of the steel market has become the need of the hour for the steel companies especially the ones from USA to take on the Asian steel market. That is why, Steel Industry Mergers have become so rampant in these days especially in the European as well as in the United States Of America. The main reason behind this is to decrease the cost of production of steel so that they would be able to supply steel at lower competitive prices to the world market.

The most fragmented steel industry is in China and India. One of the biggest deals that has taken place in the recent past is that of the acquisition of Corus by Indian heavyweight player named TATA Steel. The basic reason for Steel Industry Mergers has been access to latest technologies for driving down the cost of production and at the same time producing qualitative product.


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