As long term demand upswing of steel & cement in india is assured, larger players in both Sectors probably look for distressed assets in the coming months
ArcelorMittal is back to its acquisitive ways again. This time, it has jointly bid with Peabody Energy to submit a bid of $5.2 billion for Macarthur Coal, an Australian company known for its production of pulverised coal. The target company isn’t exactly worried about the nationality of the acquirer that will use its coal, but has a genuine desire for a higher valuation. As this magazine goes to print, there are no rival bidders, but that could change pretty soon.
In the days when Arcelor-Mittal and Tata-Corus happened, the recurring logic was consolidation to leverage a global steel demand boom led by China. Currently, a theme quite often replayed is the drive for sustainable raw material linkages, which the Macarthur deal is an instance of. As raw materials are in short supply and iron ore price volatility has been an issue, this could be the difference between making it or not in the sector in the future. Here in India, ICVL (International Coal Ventures Ltd.) is looking to acquire mines in Australia to fulfil coking coal requirements for NTPC, SAIL, RINL, et al. Private players like JSW Steel and Tata Steel are looking hard for assets too.
According to PwC, steel M&As internationally have grown by over three times to $14.3 billion in 2010 compared to $4.4 billion in 2009. Demand cycle has been firmly on the upswing and average monthly steel prices on the London Metal Exchange for cash buyer have surged from $554.25 per tonne in January to $610.64 in July. PwC has estimated that global metal M&As should more than double to $60 billion in 2011 compared to $27 billion in 2010. Noteworthy deals in the first half of 2011 have been Concast Group’s acquisition of SPS Steel and Power’s Jharsuguda-based steel plant for Rs.8 billion and JSW Steel Ltd’s acquisition of Bellary Steel and Alloys Ltd. valued at $173.91 million and $45.65 million respectively. Sesa Goa, a subsidiary of Vedanta Resources, UK has acquired the assets of Bellary Steel and Alloys Ltd. for $47.83million.
In the days when Arcelor-Mittal and Tata-Corus happened, the recurring logic was consolidation to leverage a global steel demand boom led by China. Currently, a theme quite often replayed is the drive for sustainable raw material linkages, which the Macarthur deal is an instance of. As raw materials are in short supply and iron ore price volatility has been an issue, this could be the difference between making it or not in the sector in the future. Here in India, ICVL (International Coal Ventures Ltd.) is looking to acquire mines in Australia to fulfil coking coal requirements for NTPC, SAIL, RINL, et al. Private players like JSW Steel and Tata Steel are looking hard for assets too.
According to PwC, steel M&As internationally have grown by over three times to $14.3 billion in 2010 compared to $4.4 billion in 2009. Demand cycle has been firmly on the upswing and average monthly steel prices on the London Metal Exchange for cash buyer have surged from $554.25 per tonne in January to $610.64 in July. PwC has estimated that global metal M&As should more than double to $60 billion in 2011 compared to $27 billion in 2010. Noteworthy deals in the first half of 2011 have been Concast Group’s acquisition of SPS Steel and Power’s Jharsuguda-based steel plant for Rs.8 billion and JSW Steel Ltd’s acquisition of Bellary Steel and Alloys Ltd. valued at $173.91 million and $45.65 million respectively. Sesa Goa, a subsidiary of Vedanta Resources, UK has acquired the assets of Bellary Steel and Alloys Ltd. for $47.83million.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
