CSN to dig in heels, swing radar to other markets

LONDON: Its defeat in the battle for Corus will force Brazilian steel maker CSN to scout for acquisition targets in Russia, Japan, North and Latin America and Eastern European markets where the steel industry is passing through a consolidation phase.

Steel sector analysts feel that though there are small-sized steel mills with a capacity of 2 to 4 million tonnes available in the European market for acquisition, no large-size acquisition targets like Corus may be available immediately.

Tata Steel outbid Brazilian rival CSN to take over European steelmaker Corus offering $11.3 billion for the biggest-ever acquisition by an Indian company.

���If CSN wants to establish its position in the world steel market, it has to scout for acquisition targets in Russia, Japan and North and Latin American markets. The steel industry in these countries is passing through a consolidation phase,��� an analyst said.

Takeover rumours have been floating around in the Japanese steel market, lifting stock prices of steel firms. Analysts believe Japanese steel firms like Kobe Steel, Sumitomo Metal Industries and Nippon Steel are in the process of consolidation and are looking at M&A options. Eastern European companies like Novolipetsk Steel, Evrazholding, and Kazakhmys are exploring survival strategies.

M&A activity in the steel sector is likely to continue, and China will be a significant source of M&As over the next few years as it continues to produce and consume steel at a record pace, PricewaterhouseCoopers, in its report on the world metal industry said.

���Emerging markets were most instrumental in deal-making and we expect that Eastern Europe, Asia Pacific and Latin America will continue to be the driving forces in the industry���s consolidation efforts,��� the PwC report said.
Russia���s Severstal, the immediate competitor of CSN has already said that it is interested in acquiring assets in North and Latin America, and Asia.

���In 2007, we plan to expand both by enhancing the effectiveness of existing assets and through mergers and acquisitions,��� CEO Alexei Mordashov said recently. Industry observers here believe that in future M&A deals in the global steel sector, Severstal would emerge as a strong opponent to CSN.

Last year, Severstal sought a merger with the world���s second-largest steelmaker Arcelor, but the deal, which was inked in May, fell through when it was rejected by Arcelor shareholders to clear the way for a takeover of the Luxembourg-based company by the world���s leading steel producer, Mittal Steel.