Steel Companies are now the Darlings of the Stock Market

An interesting article out of England about the little steel company just down the road from us in Hamilton.

MEPS STEEL NEWS

The current bidding by several contending parties to buy the Canadian steel producer Dofasco has highlighted the extraordinary turnaround in the value of steel company assets in the last couple of years.

Aside from privatisations, where special circumstances apply, it is hard to recall the last time that a steel company was the subject of a bidding battle between rivals anxious to grab its business and assets for itself. During the decades when steelmakers struggled to provide investors with a return on their capital, such takeover wars were rare.

Most recent steel company fusions […] have been agreed deals, not contested takeovers.

Steel company amalgamations like these were usually based on cost-cutting and finding synergies. Industry executives were looking for ways to rationalise in order to reduce inefficiencies. Such mergers often led to plant closures, capacity reductions and serious job losses.

Now things have changed. Dofasco is part of other companies’ expansion plans. ThyssenKrupp and Arcelor are both increasing their production of slabs at low-cost locations in Brazil, and they need Dofasco as a captive consumer.

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