Companies European metallurgy consolidates

After more than two years of negotiations with unions and subsequent objections Investor Activists The biggest breakthrough in the European steel industry for decades is finally a fact

Indian Tata Steel and German ThyssenKrupp unite their European divisions, the new company to Equal participation being the second largest in the sector on the Old Continent – by year turnover of 17 billion euros and 48 thousand employees, the Financial Times said.

The future of the sector

The agreement is expected to be the last bigger in the near future in the sector in Europe. The mergers, however, are significant in terms of overcapacity, cheap imports and higher duties on US steel, say the leaders of the big companies

"S & P There are more mergers on the market, this usually leads to better prices, supply discipline, "said Cedar Eblom, an badyst at Merrill Lynch." It's rational for a joint venture to position itself as a producer at a lower price. cost less than that of the two companies individually. "

However, no cut is planned at ThyssenKrupp Tata Steel, as it is the new name of the company, and this can to let the problems with unresolved production surpluses, say badysts. "There has been no consolidation in the sector for some time in Europe, so we now hope to cope with overproduction," says Carston Rake, badyst at UBS

. a new company must first win the trust of the antitrust regulator. ThyssenKrupp Tata Steel will control about 27% of the European flat steel market and ArcelorMittal 38%

How to reduce costs

The new company has set a goal of reducing its costs from 400 to 500 millions of euros. euro per year while maintaining good relations with the unions. Although 4,000 workers need to be hired and split between the two companies, there is a set of well-defined spending limits. This shows that there will be hardly any cuts until 2026 due to conflicts with the unions in Germany, the Netherlands and the UK, where are located the main production capacities d & # 39; steel. "This will naturally prevent managers and reduce costs even more difficult," said Seth Rosenfeld, an badyst at Jefferies.

Changes in distribution

ThyssenKrupp's annual production at Duisburg is 11.4 million tonnes of steel and that of the Indian company in the Netherlands is considered the most effective in Europe. Both are close to customers – the heart of the automotive industry on the continent. However, politicians and trade unions should also oppose layoffs at the third Tata plant in North Wales, which is considered by badysts to be the least competitive and most vulnerable to future staff shrinkage [19659007] These factories produce different products, "said Ricky of UBS In practice, this could mean that an object focuses on vehicle orders and that others specialize in the 39, packaging, engineering and general production. "That would lead to overall cost reductions," he added.