Integration Key Theme in Global Steel Market

Korea Times (Seoul, Korea), October 6, 2000 | Go to article overview

Integration Key Theme in Global Steel Market


Integration is increasingly the key theme in the global steel market where there have been notable strategic alliances designed to improve competitiveness.

In Asia, Europe and in North America, steel companies are looking to set up partnerships and such trends were made even more obvious at this 34th annual meeting of the International Iron and Steel Institute.

IISI Secretary General Ian Christmas said during the meeting that these international marketing alliances are indeed needed, among others, to increase shareholder value.

Christmas said the value of many steel companies are not judged in terms of their dynamics and rather on the fact that they are traditional manufacturing operations.

``To improve shareholder value, there is going to have to be more international marketing alliances and this is happening in all parts of the world,'' said the British economist.

Over the long term, he said, steel companies will be moving into two to three large groups based on which procurement and marketing is going to be done, including the use of electronic commerce.

``Steel companies are increasingly pulling their resources together to improve their competitiveness and parts of such efforts are going to involve mergers,'' Christmas said.

For instance, he said, French steelmaker Usinor has set up a partnership with Dofasco of Canada for the joint marketing of coated steel in both the United States and Europe.

``I don't anticipate that there will be hostile takeovers. Strategic alliances will take the form of mergers and this will make it possible to spread the benefits of improved corporate value,'' he said.

Indeed, in one such example, POSCO (Pohang Iron and Steel Co.) of Korea and Nippon Steel of Japan recently announced the formation of a strategic alliance to realize just such benefits.

Under the strategic alliance, POSCO and Nippon Steel are to jointly develop new technologies, move together into third markets to reduce duplicated investments.

In addition, Nippon Steel is expanding its ownership in POSCO to 3 percent, which until now has been legal limit, with POSCO obtaining reciprocal ownership in the Japanese steelmaker.

``POSCO's cooperative relations with Nippon Steel goes back all the way to its very beginning, collaborating in a wide range of fields, including technology and engineering,'' said POSCO chairman and CEO Yoo Sang-boo during the announcement of the strategic alliance in Tokyo in August.

``The strategic alliance makes it possible for the two companies to respond effectively to rapid changes in the structure of the global steel market, thereby enhancing their corporate value,'' he elaborated.

The collaborative efforts will help the two companies speed up the development of new products and offer more competitive customer support at the lowest possible prices, Yoo said. …

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