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Stainless Steel Mergers ‘Step Nearer’ on Spinoffs, MEPS Says

Consolidation in the European stainless steel industry is a “step nearer” after the four largest producers on the continent announced restructuring plans to cope with excess capacity, said metals consultants MEPS International Ltd.

Europe’s four major stainless steel producers have all been involved in significant restructuring since the beginning of 2011,” MEPS said in a note today. “It seems unlikely that this is mere coincidence. There is inevitable speculation that at least some of this activity has been in preparation for consolidation.”

European stainless-steel producers have struggled to cope with higher raw-material costs as prices of the finished metal declined 7.6 percent in the past year, according to Metal Bulletin data. Nickel, an ingredient in the alloy, has risen 23 percent on the London Metal Exchange in the period.

German steelmaker ThyssenKrupp AG (TKA) said in May it plans to sell or spin off its stainless-steel division. The decision followed a similar move by ArcelorMittal, the world’s biggest steelmaker, which separated its Aperam unit in January after years of discussions with European peers failed to bring about a merger of their stainless operations.

Spain’s Acerinox SA (ACX) and Finland’s Outokumpu Oyj (OUT1V) have both announced plans to reorganize their stainless businesses this year.

Excess Capacity

MEPS based in Sheffield, England, estimates that 25 percent of Europe’s stainless steelmaking capacity may be surplus to requirements.

“Cooperation between the major players would inevitably lead to rationalization, plant closures and reduced output,” MEPS said.

Lakshmi Mittal, chief executive officer of ArcelorMittal (MT), said in May that ThyssenKrupp’s plan was a “positive step” toward merging companies in the industry. The Mittal family owns about 41 percent of Aperam. ThyssenKrupp abandoned plans to tackle surplus capacity in 2009 after failing to achieve the price it wanted for several units.

MEPS said that ThyssenKrupp and Outokumpu would have good “geographical synergy” in Europe, while an alliance between Aperam and Acerinox would benefit their assets in the Americas.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net

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