Such references to famous European landmarks used to pepper the website of Tata Steel, reflecting the Indian company’s lofty ambition to become the world’s second-largest steel producer.
But the facts and figures section is no longer there — a telling sign perhaps of how Tata has scaled back its aspirations following a collapse in steel prices stemming from a supply glut driven by a torrent of cheap Chinese exports. Confirmation of Tata’s retrenchment came in March, when it put its lossmaking UK operations up for sale.
Then, in a change of tack after struggling to attract acceptable bids for the British business, Tata revealed this month it was in “preliminary” talks with Thyssenkrupp, its German rival, over a possible European steelmaking joint venture.
A tie-up between the European steel operations of Tata and Thyssenkrupp would create EU’s second-largest producer after ArcelorMittal, with three large works spread across Germany, the Netherlands and the UK, and estimated annual revenues of €18bn based on 2014-15 results.
A combination would amount to the biggest shake-up of the sector for a decade and might go some way towards solving the European steel industry’s longstanding problem of excess production capacity by closing unneeded plants. This could boost the pricing power of the remaining industry players, and therefore their ability to generate sustained profits.
Europe is consuming about 25 per cent less steel now than it did in 2007, according to Eurofer, a trade association that represents European steelmakers.
“If you’re looking for sustainable operations in Europe you will need closures,” says Mike Shillaker of Credit Suisse.
Cyrus Mistry, chairman of Tata Steel, says in the company’s new annual report that consolidation of the global steel industry is important amid oversupply, low commodity prices and reduced economic growth.
“Consolidation of businesses would provide an opportunity to the steel industry to remain relevant and competitive in terms of costs and value to the customers and enable investments in product innovation, technology and supply chain efficiencies,” he adds.
A joint venture involving Tata and Thyssenkrupp would have a 25 per cent share of capacity in the European market for flat steel, which is used in cars, packaging, engineering and household appliances, according to Jefferies analysts.
Both companies are under pressure from ArcelorMittal, whose share of this market would increase from 33 per cent to 40 if it succeeds in a joint bid with Marcegaglia group to acquire Ilva, the Italian steelmaker.
Source: FT