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Journalism of Courage
The merger between Mittal Steel and Arcelor will ignite a global consolidation in the highly fragmented steel industry and will also bring down the price volatility in the commodity, say analysts.
This merger will also make other steel companies including the American and Japanese steel giants to look for similar arrangements, add analysts.
According to projections made by Mittal Steel , both companies can benefit from each other synergies with Arcelor and Mittal Steel getting a presence in almost all global markets.
In India too, Mittal Steel is setting up a plant in Jharkhand which will now be controlled by the new entity. Arcelor had earlier said that it wants to set up plants in emerging markets like India and China. With Mittal steel already having a presence here. Arcelor need not to worry about these two key markets.
Arcelor did had an arrangement with Tata Steel which will be looked into by the new company, say analysts. ‘‘This is definitely a huge consolidation. It creates a stronger negotiating block for selling raw materials. The combined entity will become the largest supplier,’’ says Anki Miglani of Uttam Galva steel.
‘‘Arcelor is strong in supplying raw materials to auto segment and Mittal Steel strength lies in supplying to commercial segment. The deal has strengthened the supply-side. The deal should reduce the volatility we saw in the last two years,’’ he adds.
Others disagree. ‘‘Volatility will not reduce. Neither Mittal Steel nor Arcelor decide the steel price. The combined entity will have a control only on 10% of the steel produce. This is not enough the reduce the volatility in steel pricing,’’ said an analyst.
