EU forges ahead with steel sector M&A – but it won’t solve overcapacity

European steel’s current major M&A activity — driven by market recovery since mid-2017 — aims to achieve synergies and boost cost-effectiveness in a global steel sector still plagued by as much as 657 million mt of overcapacity, according to Organization for Economic Cooperation and Development estimates. ArcelorMittal (AM), the world’s biggest steelmaker, is to acquire Italy’s biggest, Ilva, while the knot has been tied between Thyssenkrupp Steel Europe and Tata Steel Europe in a union still to receive the European Commission’s final blessing. But while both deals are expected to proceed, they won’t solve Europe’s steel overcapacity problem: analysts maintain actual capacity closures are still far off due to restrictions by local authorities and trade unions. Big is not always beautiful, and especially not where the EC is concerned: the M&A merry-go-round of shifting assets will continue in a move to preserve jobs and improve loss-making installations. Social concerns play a pivotal role in the EC’s holistic industrial restructuring scheme. The TK-Tata merger may require tinplate assets to be sold. AM’s merger with Ilva will also require divestments: German steelmaker Salzgitter mid-July submitted an offer to buy production lines at AM mills in Dudelange, Luxembourg and Liege, Belgium. Analysts estimate… continue reading

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Source: CTRM Center

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