Stainless steel market trends

Concentration – the main sign of time in many branch markets. For example, the world mining market is already concentrated almost to a limit – 70 % of manufacture are necessary on a share of three transnational corporations. On this background the Ukrainian players, moreover on the eve of the introduction of the country into the WTO feel not so cosy and consequently try on on itself various strategy. One have chosen specialisation, others unite actives.

On twenty fifth of September it has been declared merge of metallurgical actives of owner System Capital Management (SCM) and the proprietor of "Smart holding" Vadim Novinsky. The incorporated company is estimated by analysts in 20 bln dollars, Having concentrated as a result of association two thirds of raw-material base in a complex of Ukraine, «Metinvest» [operates metallurgical actives SCM) has had an opportunity directly to influence other manufacturers. After expansion this company will take the fifth place in a rating 65;57>@C4=KE the enterprises and will enter into the twenty of the largest steelmaking corporations of the world. Ahmetov's empire Rinata will replenish with three more enterprises — Makeevsky metal works, Inguletsky mountain-concentrating combine, and also Bulgarian rolling factory Promet Steel. 

This transaction has actuated all Ukrainian metallurgical market. There are negotiations about merge between corporation «Industrial Union of Donbass» of Sergey Taruty and Vitaly Gajduka and Alisher Usmanov's Russian holding. Owners Mariupol steel mil a name of Ilyich Vladimir Bojko and «Zaporozstal» Edward Shifrin search for partners.

So, in September, 2007 of company System Capital Management (it is supervised by Rinatom Ahmetov) and "Smart holding" (under Vadim Novinsky's control) declared the decision to unite the mountain-metallurgical actives till the end of 2007 As a result of association V.Novinsky will receive 25 % + 1 action of holding "Metinvest" (operates mountain-metallurgical actives SCM), having transferred to it the shares in Makeevsky metal works (90,18 %), Inguletsky 5 (82,46 %) and Bulgarian rolling factory Promet Steel (90 %). In December the basic arrangement on transfer of a share holding Southern (to 50 %) has been reached also.


Preparation for the transaction has begun in the spring when "Smart holding" has suggested "MetinvestC" to take part in modernisation . The parties have looked narrowly to each other and have decided, that their cooperation can go further.

Igor Syryj, the director "Metinvest0", says, that the received actives successfully supplement their business.  after modernisation becomes the powerful and modern manufacturer of a steel, expands possibilities for maneuver with raw materials, and Promet Steel gives one more unlimited quotas an exit on a perspective commodity market of the European Union (the company already knows Italian <5B:><18=0B>< Ferriera Valsider). Besides, the increase in scale of business gives additional possibilities for decrease in costs and efficiency increase on sales, logistics, purchases, repairs. In "Metinvest5" have counted up, that it is possible to receive to $200 million a year only from reduction of operational costs. Decrease in the cost price of production becomes the important help in competitive struggle.


The incorporated company will be included into the first five of the world's largest on stocks steel raw materials and in the first twenty of the metallurgical companies of the world. Its capitalisation is estimated approximately in $20 billion


But from this transaction an indirect prize can receive both other companies, and the Ukrainian mountain-metallurgical market as a whole. After all will raise not only capitalisation of the incorporated company, but also all mountain-metallurgical complex.


Process of merge of mountain-metallurgical actives of "Smart holding" and SCM deduces on new level the Ukrainian market of merges and absorption (M&A) as the size of such transaction exceeds a turn of all Ukrainian market M&A in 2008.


The transaction becomes the largest for a mountain-metallurgical complex on all post-Soviet territory on which 12 % of world production raw materials and 40 % of its stocks are necessary.


It is not excluded, that with association of three Ukrainian steel leaders consolidation process already on all this space will begin, conversations will pass the OPEC in a real plane, and in the given process will play the important role.