The steel industry in Europe is looking for new forces through mergers and acquisitions

The important producers in the steel industry in Europe suffered are trying to counter overcapacity and dumping.

Ilva, the largest steel plant in Europe, should have benefited from certain advantages. Instead, it was affected by a series of blows. Including a legal case regarding allegations that they poisoned local residents with toxic emissions, nationalization and ultimately insolvency in 2015.

Salvation finally came this summer, when Ilva was sold for 1.8 billion euros to a consortium led by ArcelorMittal. The largest steel producer in the world.

The business was seen by industry executives as an important step in the consolidation of the European steel sector.

„Ilva is a low-cost producer and we believe that, thanks to all our expertise, technological contributions and managerial expertise, we can turn it into a very successful steel mill,” says Lakshmi Mittal, the Luxembourg-based group’s executive director.

Another significant merger of companies is also planned. The next two European producers in terms of capacity, Tata Steel and ThyssenKrupp, have been in discussions for over a year. A reform of the Tata Steel pension fund in Great Britain has just been completed. Paving the way for a joint venture agreement.

But unlike the last big ownership changes in European steel, when empires were built during the commodities boom a decade ago. These movements reflect a period of weakness, not strength.

The steel industry in Europe suffered losses due to the financial crisis in 2018

Since the start of the financial crisis in 2008, steel producers in the European Union have faced weak demand in the region, expensive environmental policies and cheap imports from outside the bloc.

Dad suffered repeated losses in the UK. While ThyssenKrupp plans to leave the steel industry and focus on more lucrative capital goods. Such as elevators and components for industry.

Mergers offer a way to lower costs and reduce the number of competitors in an oversized market. At the same time giving greater leverage in negotiating with large clients in key areas such as the automotive sector.

Alessandro Abate, analyst at Berenberg, believes that the improvements at Ilva, due to its new owner, could have a positive impact on the European steel market. ArcelorMittal promised to invest in modernizations and environmental protection.

Steel buyers would no longer have to block cash for weeks or months. In the cargo vessels that transport the material from across the ocean.

Article source: https://www.ft.com/content/0b3eefa4-7c3f-11e7-ab01-a13271d1ee9c