STEEL
INDUSTRY CONSOLIDATION DRIVE SWITCHES TO LATIN AMERICA
Consolidation of the steel
industry in North America took a giant leap forward with Mittal
Steel’s acquisition of International Steel Group earlier this
year. Since 2000, ten independent integrated steel companies have
amalgamated into three majors, and eight separate electric furnace
operators have merged into two big groups. Some independents still
remain, but consolidation in North America has been largely
completed.
Now the industry’s attention is turning
to Latin America where consolidation is starting to gather momentum.
Several deals are currently under way that aim to bring together
multiple steel plants under common ownership in order to exploit
economies of scale.
The most ambitious of these was unveiled a
few weeks ago by Techint, the steel, engineering and energy group
based in Buenos Aires. It plans to acquire Mexico’s largest steel
producer, Hylsamex, for the substantial price of $US2.3 billion.
This would create Latin America’s largest
steelmaking combine, with operations stretching from Argentina to
the US border. Techint already owns Argentina’s largest steel
maker, the 2.8 million tonne per year flat rolled products
manufacturer Siderar, and has a controlling share in Venezuelan flat
and long producer Sidor. Together with Hylsamex, the new enterprise
would be able to make around 12 million tonne per year, putting it
in the top 20 global producers.
Brazil’s Usiminas – which has already
become that country’s largest steelmaker by taking control of
plate and coil producer Cosipa – also aims to be a substantial
shareholder in Techint’s new concern. This may lead to further
consolidation in the medium term.
There is good reason to believe Techint’s
grand plan will be accomplished, as the company has a solid track
record in corporate deal-making. In the early 1990’s it began
building up a group of seamless tube producers, by acquisition.
These included taking over NKK’s mill in Japan in a pact that was
the first to allow foreign owners to control a Japanese steel
company. Today Tenaris – as the company is now called – is the
worlds largest seamless tube producer, with manufacturing operations
in nine countries.
One of the pioneers in consolidation of
steelmaking throughout the Americas is the Brazil-based Gerdau
group. For many years it has produced steel in Uruguay, Chile and
Argentina as well as Brazil. Its North American arm, Gerdau
Ameristeel, operates in Canada and the USA where it recently
acquired the North Star Steel mini-mills. The group as a whole
produced more than 13 million tonnes of crude steel last year.
Gerdau is continuing to look for acquisitions and is in the process
of taking over the largest electric steel mill operator in Colombia.
Arcelor is also active in consolidating the
Latin American steel sector. Later this year, it plans to establish
a holding company for several producers in Brazil and Argentina in
which it has interests. The new Arcelor do Brasil company is
expected to be listed on the São Paulo stock exchange.
Assuming all these deals go through as
planned, there still remain opportunities for further consolidation
of the Latin American industry. There is currently speculation that
mills in Chile, Peru, Mexico and Colombia may become takeover
targets. Although some of these would need significant investment to
upgrade their production processes, the generally positive prospects
for the region’s steel markets make them attractive – if the
price is right.
