The global steel market continues to be in a state of flux. The recent euphoria over the price recovery proved unjustified as the real increase was only marginal. Finances for the steel companies all over the world had become scarce and global competition fierce. The survival strategies of the companies have fewer leverages in terms of expansion of market presence in their home markets.
The recent collapse of steel prices has initiated another round of rethinking on the viability of the industry. Strategic options perhaps exist in the areas of business restructuring and consolidation. However, this is only an option that involves many players - steel companies, banks, government and shareholders.
The
global steel industry is facing a peculiar challenge. For
the developed countries, most of their infrastructure projects
have been completed and therefore, the bulk demand for steel
in such countries has ceased. In case of the developing countries,
most of their growth has been State-led rather than enterprise
led and therefore, much of the government finances in such
states get frittered away in maintaining a large bureaucracy,
and paying for subsidies rather than have funds to develop
infrastructure. Since the growth in the developing countries
is more of a planned and an induced growth and not the spontaneous
growth witnessed by the Industrial Revolution in Europe, governments
of such countries are always under the constraint of adequate
resources in order to build the required infrastructure. This
is why, the global steel demand is flattening out - the rich
countries do not need more steel and the poorer countries
can no longer pay for the steel which they want. This contraction
of demand for steel almost in every country of the world has
put a cap on the growth of this industry globally. The major
motive behind the consolidation and merger of steel industries
is to minimize idle capacity.
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