Analysis of consolidation trends in the global steel industry: special focus on India

Abstract

Global steel industry is undergoing a phenomenal change with economic prowess of countries such as China and India driving the growth of the industry at a never before pace. The steel industry, in general, is on the upswing, due to strong growth in demand propelled particularly by the demand for steel in the emerging economies including India and China. This report aims at analyzing the consolidation trends in the global steel industry with special focus on India. During the past decade there has been a remarkable territorial shift in the global steel production and consumption trends. Companies have emerged from being small regional players to become global steel giants through series of consolidation, restructuring and rationalization efforts. During the study, it was discovered that companies from a particular country behaved in a particular manner when it came to consolidation activities. The study concludes that the motivations behind deals differ from country to country and it is evident that countries can be divided into various clusters, depending on the common rationales behind M and A deals. Countries such as India and China go out for capacity expansion and technological access. On the other hand countries such as US, UK, etc. are in a lookout for low cost resources and downstream integration. Inward deals into countries such as Australia and Russia are primarily for raw materials and those into developed countries are for technology transfer. China and Russia are concentrating on domestic consolidation and India is looking out for capacity expansion. The study focuses eventually on Indian M and A deals and proves the hypothesis: Indian companies primarily go for deals in order to acquire advanced technology and to expand capacity. Based on the cluster analysis and hypotheses testing the consolidation rationales of Indian steel companies are expected to shift from access to technology and capacity expansion towards market expansion, product expansion, upstream integration and eventually towards downstream integration. In terms of inward consolidation, Indian steel industry is expected to continue witnessing M and A deals with access to low cost resources as the key rationale. Owing to low per capita consumption, India is expected to witness a high growth in steel demand in the near future and thereby, see a lot of inward deals by international companies in order to get access to the high growth Indian market.