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Companies With No Borders |
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10/10/2005 14:25:01 Perhaps one of the most significant changes which have taken place in the steel industry is transformation of the companies which used to be proud of their national and regional character and their geographical position and see in this character a source of pride for them into “companies without a nation” or rather without a specific national affiliation, as they inhabit the world and their nation is where their plants and investments are existing. This is reflected in the accelerating trend of the steel companies towards more consolidation and setting up alliances which have gone beyond the drawn borders of states. This has changed the production map of this industry at both regional and world levels. Companies which were considered major companies have vanished and other companies have come into existence and become, under being acquired or merged with other companies, the companies which are now occupying the frontal position. Merger of Mittal Steel during the instant April with International Steel Group (ISG) is the most expressive picture of this new and accelerating trend of the companies with no borders. It is expected that the production capacity of this new company after the merging process taking place in the instant April will come up to about 63 million tons of crude steel to be produced in mills distributed over 14 countries in the world including Al-Hadjar mill in Algeria which is now known as “Mittal Steel - Al-Hadjar” which in 2004 had produced slightly over one million tons of crude steel and is expected to produce 1.7 million tons during this year. There are some analysts who see that the steel industry is still of a less merging compared to a number of other industries, such as aluminium and automotive industries including the industries which are strongly allied to the steel industry like the iron ore controlled by three companies supplying the world market with over 75%, while the largest five producing world companies control only about 18% of the world steel production. Also the first top ten companies control 26.75% according to a list made by Metal Bulletin on the largest 103 steel companies at the world level. Two Arab companies were listed in this list. They are Ezz-Dkheila which has ranked 59 and Saudi Iron and Steel Company ranking 63. The largest steel producing companies at present think that the power of this industry underlies emergence of new stronger mergers in the future so that there will be a number of producers the production of each of which will exceed 100 million tons.This will grant this industry the possibility to be more capable to control its problems and direct its costs in a better way. These are matters which are difficult to be put under control with the continuation of the fragmentation state which is still evidently leaving its prints evidently on a number of steel industries in a number of countries including the Arab steel industry. It would attract attention that the Arab steel industry which has gained an increasing vitality during the last years, more definitely during the past two years, has witnessed setting up of dozens of new steel projects all of which are maintaining their family character, or let’s say their national affiliation, which will strengthen the individual state of industrial thinking and the state of fragmentation experienced by this industry. This is a state of which the negative phenomena would not come to light under the circumstances of recovery presently gone through by this industry and it will be more strengthened with the presence of a favourable economic climate generating an improved demand for the steel products and the increase of their prices to high levels. In spite of having no strong evidences about the possibilities of near mergers in the future, either among the presently existing Arab companies or even among the new projects which are still underway, it is also not possible to ignore some cases in which such mergers have appeared like the strategic alliance between Ezz-Dkheila and Ezz plants which are now known under the name of Ezz-Dkheila which in 2004 produced more than 4 million tons of final products, also acquisition of Mittal Steel of a 75% share of the shares of Al-Hadjar, and CVRD’s acquisition of a 50% share in the Industrial Investment Gulf Company. There is also some talk going on about signing a Memorandum of Understanding between Qatar Iron and Steel Company “QASCO” and the Indian “Essar” company to set up a joint project for producing hot-briquetted iron and rolled flat products on two stages the first of which will be completed before the end of the present decade. All these are cases which have revealed the importance of merger or partnership because these mergers have contributed to achieving significant production figures and to a situation enjoying more competitiveness in the steel market. What we want to assert here is that in spite of the importance of the trend to merging and the growing horizontal and vertical spread cases of the world companies with the aim to control markets evidently appearing through the strategies set by “the companies with no borders”, there are still companies holding up national nominations, Chinese, Indian, American and any other nominations which maintain for them their national and geographical particularity. The national affiliation of the Arab steel industry is also still the prevailing one which is dominating the nominations of many major Arab companies and this trend must be strengthened by a new strategy based on the principle that “to guarantee the future of the steel industry, the steel must also be in the service of the future generations”. Arab Steel |
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