“Further consolidation is necessary and I think this merger could well prove to be a catalyst for further mergers and acquisitions within the industry. Over the next 10 years we could well see a number of companies forming alliances which would lead to a handful of global producers each with capacities in the region of 150-200 million tonnes. ”
Now let us see who are these handful of producers who could muster capacities in the region of 150-200 million tonnes in the next 10 years.Today the world production of steel is in the region of 350 million tonnes with the Mittal Arcelor Steel having about 97 million tonnes capacity, and the remaining big players like Nippon,Posco,JEE, Shanghai Steel, US STeel ,SAIL etc have less than 35million tonnes each.
Looking at the per capita consumption of steel in Asia region,and specially in the developing countries its logical that capacities should go up in this region more than in Europe.Mittal Steel has already signed a MOU to set up a 12 million tonne greenfield plant in the state of Jharkhand. So it appears that LN Mittal has already set his eyes to expand his Mittal Steel in India either by greenfield,or brownfield or through M&A.Why not start with Ispat Industries and get a jump start.Ispat Ind and Mittal Steel have same DNA and today Ispat is in need of funds which LNM can spare. An arrangement like with Arcelor will benefit both Mittal and Ispat Groups,and specially Ispat Ind shareholders.