Steel follow-up
Hardly having announced the merger with American ISG that will make up the #1 steel company in the world, the Mittal family is considering their next step. The company CEO, Lakshmi Mittal, has stated he is looking to acquire Turkey's largest steel plant, Erdemir, which is being spun off by the Turkish government early in 2005. The plant has capacity to manufacture about 4.5 metric tons of steel, making it a significant small player. The company is also looking to build a plant in India.
Meanwhile, a Wall Street Journal article ("Steel Consumers See Cost Pressures From Mittal Plan", 10/27/04) states that US companies that buy steel who have already seen higher rise due to industry concentration in the last few years, expect prices to go ever higher. Three companies, U.S. Steel, the Mittal Group, and smaller AK Steel seem now dominate many aspects of the US steel market. And, the article notes, "Additional consolidation is expected in North America."
In addition, the article states that the global price pressures are strong: "Steelmakers around the globe have been locking in current high prices with long-term contracts, with big producers saying the new prices are about 20% higher than under previous contracts."
Steel is still a loose oligopoly, with a few very major players, but very many companies across the world with capacities of under 8 million metric tons. Many of these are protected by local governments, but thanks to trade agreements and capital requirements, that is starting to change. On a bigger level, ThyssenKrupp of Germany has raised the possibility of a merger with either Anglo/Dutch Corus Group or Italian Riva Group. A Corus/Thyssen deal could make for a new #3 steel producer.
Below are the 2003 production figures for the top 20 steelmakers. Note that an increasing number of these companies, just like the Mittal Group and Arcelor, have operations throughout the world, in cheaper labor markets like Brazil, Russia, and Eastern Asia.
