Экономист: Производители стали на коне, до следующего избытка
11/28/2005 | line305b
производства.
В отличие от многих наших желающих производить сталь своими силами, или покупать акции в уверенности неприрывного роста прибылей, вполне влиятельный Экономист считает, что счастье это временное...
В общем, рекомендуется трезвый заокеанский взгляд на вещи. Кстати, неплохо бы, пока есть спрос, продать и другие подходящие активы. Или нет уже ничего?
Steelmakers on a roll, until the next glut
Nov 25th 2005
From The Economist Global Agenda
China’s appetite for steel has provided the rest of the world’s big producers with a rare period of boom and helped to finance a buying spree, of which Arcelor’s hostile bid for Dofasco is just the latest example. But burgeoning Chinese steel production threatens to flood the market and test whether sheer size will offer any protection to the world’s steel giants
AS RECENTLY as six years ago, while investors were still in thrall to a dotcom bubble that had yet to burst, steel was derided as one of the last bastions of the “old” economy. Many firms in the industry were state-owned or heavily protected by governments keen to preserve assets deemed vital to national interests. Globalisation had left the steel business behind. It is a measure of the changes that have swept the business since the internet bubble popped that this week Arcelor, a company created through a 2001 merger of the top French, Spanish and Luxembourg steelmakers, made a hostile bid of C$4.4 billion ($3.8 billion), in cash, for Dofasco, Canada’s leading steel firm.
There is further evidence that the industry has changed. Rumours are circulating that Arcelor, the world’s second-largest steel producer, could face competition for the hand of Dofasco from German or American steelmakers. Arcelor’s reasons for going hostile are partly ascribed to pique that its lost out earlier this year to Mittal, the world’s leading steel company, in a bid for control of Kryvorizhstal, Ukraine’s former state-owned steel firm. Mittal prevailed with an offer of $4.8 billion. And both Arcelor and Mittal recently lost out to a domestic bidder for a slice of Erdemir, a Turkish state-owned steel firm. The past year has also seen a host of smaller deals, such as that announced by Mittal on Wednesday November 23rd to acquire some assets from Stelco, a bankrupt Canadian steel producer.
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This wave of mergers, acquisitions and asset sales has helped to revive the fortunes of the world’s steelmakers by reducing the chronic overcapacity that had troubled the industry for decades. This has brought new and more effective leadership into a business that was a byword for bad management. The privatisation of assets in former Communist countries in Eastern Europe and other developing economies has boosted the opportunity for consolidation.
By far the most important factor behind steel’s revival, however, is China’s booming economy. China’s soaring demand for steel sent prices spiralling upwards until recently: benchmark hot-rolled coil, which sold for as little as $200 a tonne in 2001, broke the $600 barrier in 2004, though prices have since fallen back (see chart). The boom in prices ushered in a time of profits and high valuations in a business where bail-out and bankruptcy had previously been the norm. But two problems still confront steelmakers.
The first is that their improving lot has not gone unnoticed by those who sell the raw materials that feed the world’s steel mills. Suppliers of iron ore grouped together to demand hefty price rises of 72% for their products in March this year, even after obtaining a 19% rise last year. Suppliers of coking coal, also vital to the steelmaking process, insisted on even greater hikes. Early forecasts suggest that iron-ore suppliers could want another big price rise—perhaps as much as 20%—next year. This year’s rise is likely to add $40-60 to the price of producing a tonne of steel, just as prices for end users are falling.
The second, and potentially much bigger, concern is that China’s vast appetite for the metal—it accounts for 30% of global consumption—could begin to wane. This would prove particularly painful for the industry if Chinese production were to continue rising. In 2004, Chinese mills rolled out 273m tonnes of steel, according to the International Iron and Steel Institute. In the first ten months of this year, they produced 287m tonnes.
China’s government, fearful that its rip-roaring growth could lead to overheating, has introduced measures to cool the economy. The effects could soon be felt in China and beyond. Baosteel, the country’s biggest producer, has said it will cut prices for its main products by 10% in the first quarter of 2006, because of a nationwide glut. Though the economy continues to grow at rates not far short of 10% a year, even a modest slowdown could result in the steel surplus having an impact on world markets.
The world’s big steelmakers are hoping that, by getting bigger, they can reap the rewards in the good times and insulate themselves if things turn nasty. Lakshmi Mittal, head of the eponymous steelmaker, and Guy Dollé, the boss of Arcelor, both agree that the industry will be dominated by a few big firms, each producing over 100m tonnes annually, in the coming years. Mittal, a private London-based company that gained control of America’s International Steel Group earlier this year, is set to boost annual output to over 65m tonnes with the Ukrainian acquisition. Even including Dofasco’s output, Arcelor would lag some way behind. But both are expanding where they can, snapping up small and medium-sized producers as they become available.
More consolidation would certainly give steel firms extra clout when negotiating ore and coke prices. The world’s top five steelmakers still command only around one-fifth of the global market, whereas the three leading ore firms control 70% of supplies. The level of consolidation that would confer significant market power on the largest mills still seems a long way off.
If you can’t beat them…
One way to shift the balance of power is to encroach on the suppliers’ turf, and a few big steel firms have been doing just that, buying into ore and coke operations. Dofasco is a tempting target partly because it has its own ore business; compared with Mittal and US Steel, Arcelor has few ore reserves of its own. South Korea’s POSCO, the world’s fifth-largest steel firm, has sought stakes in ore mines in Brazil and Australia. Mittal’s thirst for raw materials has even led it to make approaches to an ore producer in Liberia, despite the political uncertainty there.
The big steelmakers hope that further consolidation will help to shift the balance of power in their favour, and they appear convinced that sheer bulk will help them to ride out any future slackening of demand. But size in the steel business does not, in itself, bring great rewards in terms of economies of scale—especially if, as many suspect, predators are overpaying for assets. If world markets are about to experience another serious glut, all producers, big and small, will feel the heat.
В отличие от многих наших желающих производить сталь своими силами, или покупать акции в уверенности неприрывного роста прибылей, вполне влиятельный Экономист считает, что счастье это временное...
В общем, рекомендуется трезвый заокеанский взгляд на вещи. Кстати, неплохо бы, пока есть спрос, продать и другие подходящие активы. Или нет уже ничего?
Steelmakers on a roll, until the next glut
Nov 25th 2005
From The Economist Global Agenda
China’s appetite for steel has provided the rest of the world’s big producers with a rare period of boom and helped to finance a buying spree, of which Arcelor’s hostile bid for Dofasco is just the latest example. But burgeoning Chinese steel production threatens to flood the market and test whether sheer size will offer any protection to the world’s steel giants
AS RECENTLY as six years ago, while investors were still in thrall to a dotcom bubble that had yet to burst, steel was derided as one of the last bastions of the “old” economy. Many firms in the industry were state-owned or heavily protected by governments keen to preserve assets deemed vital to national interests. Globalisation had left the steel business behind. It is a measure of the changes that have swept the business since the internet bubble popped that this week Arcelor, a company created through a 2001 merger of the top French, Spanish and Luxembourg steelmakers, made a hostile bid of C$4.4 billion ($3.8 billion), in cash, for Dofasco, Canada’s leading steel firm.
There is further evidence that the industry has changed. Rumours are circulating that Arcelor, the world’s second-largest steel producer, could face competition for the hand of Dofasco from German or American steelmakers. Arcelor’s reasons for going hostile are partly ascribed to pique that its lost out earlier this year to Mittal, the world’s leading steel company, in a bid for control of Kryvorizhstal, Ukraine’s former state-owned steel firm. Mittal prevailed with an offer of $4.8 billion. And both Arcelor and Mittal recently lost out to a domestic bidder for a slice of Erdemir, a Turkish state-owned steel firm. The past year has also seen a host of smaller deals, such as that announced by Mittal on Wednesday November 23rd to acquire some assets from Stelco, a bankrupt Canadian steel producer.
Advertisement
This wave of mergers, acquisitions and asset sales has helped to revive the fortunes of the world’s steelmakers by reducing the chronic overcapacity that had troubled the industry for decades. This has brought new and more effective leadership into a business that was a byword for bad management. The privatisation of assets in former Communist countries in Eastern Europe and other developing economies has boosted the opportunity for consolidation.
By far the most important factor behind steel’s revival, however, is China’s booming economy. China’s soaring demand for steel sent prices spiralling upwards until recently: benchmark hot-rolled coil, which sold for as little as $200 a tonne in 2001, broke the $600 barrier in 2004, though prices have since fallen back (see chart). The boom in prices ushered in a time of profits and high valuations in a business where bail-out and bankruptcy had previously been the norm. But two problems still confront steelmakers.
The first is that their improving lot has not gone unnoticed by those who sell the raw materials that feed the world’s steel mills. Suppliers of iron ore grouped together to demand hefty price rises of 72% for their products in March this year, even after obtaining a 19% rise last year. Suppliers of coking coal, also vital to the steelmaking process, insisted on even greater hikes. Early forecasts suggest that iron-ore suppliers could want another big price rise—perhaps as much as 20%—next year. This year’s rise is likely to add $40-60 to the price of producing a tonne of steel, just as prices for end users are falling.
The second, and potentially much bigger, concern is that China’s vast appetite for the metal—it accounts for 30% of global consumption—could begin to wane. This would prove particularly painful for the industry if Chinese production were to continue rising. In 2004, Chinese mills rolled out 273m tonnes of steel, according to the International Iron and Steel Institute. In the first ten months of this year, they produced 287m tonnes.
China’s government, fearful that its rip-roaring growth could lead to overheating, has introduced measures to cool the economy. The effects could soon be felt in China and beyond. Baosteel, the country’s biggest producer, has said it will cut prices for its main products by 10% in the first quarter of 2006, because of a nationwide glut. Though the economy continues to grow at rates not far short of 10% a year, even a modest slowdown could result in the steel surplus having an impact on world markets.
The world’s big steelmakers are hoping that, by getting bigger, they can reap the rewards in the good times and insulate themselves if things turn nasty. Lakshmi Mittal, head of the eponymous steelmaker, and Guy Dollé, the boss of Arcelor, both agree that the industry will be dominated by a few big firms, each producing over 100m tonnes annually, in the coming years. Mittal, a private London-based company that gained control of America’s International Steel Group earlier this year, is set to boost annual output to over 65m tonnes with the Ukrainian acquisition. Even including Dofasco’s output, Arcelor would lag some way behind. But both are expanding where they can, snapping up small and medium-sized producers as they become available.
More consolidation would certainly give steel firms extra clout when negotiating ore and coke prices. The world’s top five steelmakers still command only around one-fifth of the global market, whereas the three leading ore firms control 70% of supplies. The level of consolidation that would confer significant market power on the largest mills still seems a long way off.
If you can’t beat them…
One way to shift the balance of power is to encroach on the suppliers’ turf, and a few big steel firms have been doing just that, buying into ore and coke operations. Dofasco is a tempting target partly because it has its own ore business; compared with Mittal and US Steel, Arcelor has few ore reserves of its own. South Korea’s POSCO, the world’s fifth-largest steel firm, has sought stakes in ore mines in Brazil and Australia. Mittal’s thirst for raw materials has even led it to make approaches to an ore producer in Liberia, despite the political uncertainty there.
The big steelmakers hope that further consolidation will help to shift the balance of power in their favour, and they appear convinced that sheer bulk will help them to ride out any future slackening of demand. But size in the steel business does not, in itself, bring great rewards in terms of economies of scale—especially if, as many suspect, predators are overpaying for assets. If world markets are about to experience another serious glut, all producers, big and small, will feel the heat.