AmeriSteel is buying Co-Steel, Nucor has purchased Birmingham Steel and Steel Dynamics Inc. has picked up what was left of Qualitech Steel—and that could be just the beginning.
Steel industry consolidation is both underway and destined to gain momentum, according to Keith Busse, CEO of Steel Dynamics Inc., Fort Wayne, Ind., and Phillip Casey, CEO of AmeriSteel Corp., Tampa, Fla. Both executives spoke to attendees of the Institute of Scrap Recycling Industries Inc. (ISRI) Commodity Roundtables, being held this week in Chicago.
“I think the era of consolidation is just beginning. Over the next 18-24 months you’ll see an accelaration of activity,” said Casey. He predicted that by 2005, there would be just two or three U.S.-based integrated steelmakers and four or five electric arc furnace (EAF) mini-mill operating companies in the U.S.
Casey said a “critical mass” of from 10 to 15 million tons of steelmaking capacity will be needed by surviving EAF companies, and that steelmakers will need operations over a wide geographic range and across a broad product line.
AmeriSteel, now owned by Brazil’s Gerdau SA, has made its bid to be among the survivors by picking up a former Birmingham Steel facility in Cartersville, Ga., and with its pending acquisition of Co-Steel. After the Co-Steel acquisition, AmeriSteel will have 11 mini-mills and 13 scrap facilities in the U.S. and Canada.
“All the other mini-mills have got to be addressing the question: Where are they going moving forward?” said Casey.
Busse did not predict that the end result of consolidation would be just a handful of companies, but he did see the trend as inevitable. “There is a tremendous move underfoot to consolidate,” he stated. “I think you’re going to see a lot [of consolidation] on the mini-mill side and some on the integrated side. Twenty years from now we’ll be a much smaller industry than we are today.”
Steel industry consultant Michael Locker, Locker Assoc., New York, also predicted further consolidation, with overseas companies leading the way. “I see an accelerated worldwide consolidation pace, especially abroad,” he remarked, noting the major mergers that have taken place between steelmakers based in Western Europe.
“The integrated side in the U.S.will continue to lag [in consolidating] until legacy costs are dealt with—or not dealt with,” said Locker, referring to the disappearance of benefits for retirees of the former LTV Corp.