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A Metal Bulletin Research report on the alliances of 24 large steel companies found a total of 490 partnerships, of which 24% were developed in the past three years.

The Metal Bulletin Research report “A Critical Analysis of Company Strategic Alliances within the Global Steel Industry” covers the alliances of 24 large steel companies up to December 2012, and found a total of 490 partnerships, of which 24% were developed in the past three years.

This shows that strategic alliances have gained momentum. In addition, the report shows that there were 92 break-ups between 1957 and 2012, of which 27% happened in 2010-2012.

The sample of 24 companies consists of five companies from mainland China, three from India, six from Asia, four from Europe, and six from North and South America, and was intended to offer a truly global perspective.

Alliances by sector
The data also show that 34% of all strategic alliances involved the re-rolling and processing sector, 32% related to raw materials, 20% to steelmaking, 5% to tube-making and 8% to other business areas. Drilling down into specific sectors showed that more than half of all the partnerships related to flat re-rolling, iron ore, coal, and flat steelmaking (see chart on alliances by sector).

Steel sectors by their number of alliances – click on the chart to show a larger version

The report also looks at strategic alliances by region, by type (joint venture, minority shareholding, consortium, and cross-ownership), by partner’s nationality (domestic or cross-border).

The data also show that steelmakers have preferred to get involved in partnerships with other steel players (41%), followed by miners (26%) and trading companies (7%).

Having looked at the entire period, we then carried out the same analysis for the 2010-2012 period, in order to compare the similarities and differences between the recent boom in alliances with the entire database.

Strategic Alliance Index
The report also provides a “strategic alliance index” (SAI), varying from zero to 10. The SAI combines six indicators:
• The importance of the strategic alliance in fulfilling the company’s growth objectives (2 points – qualitative): higher importance implies more business opportunities;
• The number of strategic alliances (2 points – quantitative): higher number denotes higher commitment to partnerships. On average, the analysed steel companies each developed 24 strategic alliances;
• The average duration of strategic alliances (1 point – quantitative): higher number suggests a more reliable partner. On average, the average duration of the strategic alliances is 8.6 years (see chart on duration of alliances);
• The degree of relaxation of operational control (1 point – qualitative): a lack of obsession about control in the partnerships indicates a good partner;
• The level of conflict with partners (2 points – qualitative): a low degree of conflict indicates a good partner;
• The frequency of break-ups (2 points – quantitative): A low proportion of “divorces” implies a good long-term partner. On average, the alliances of the 24 steel companies have a 19% divorce rate.

The 24 steel companies by the duration of their alliances – click on the chart to show a larger version

The index resulted in four companies being classified with high SAI (higher or equal than 7.9), nine with medium-high SAI (between 5.7 and 7.8), seven with medium-low SAI (between 3.6 and 5.6) and four with low SAI (lower or equal than 3.5).

The last (and the most important) part of the report are the findings by company. These comprised the individual analysis for each of the 24 global steel companies, showing the main assets, all strategic alliances and the qualitative discussion about how they managed their partnerships.

For each strategic alliance, there is information about when it was started, if and when it was ended, the main motivations that underpinned its formation and any interruptions.

Overall, it should be borne in mind that strategic partnerships are not a panacea for solving all the problems besetting steelmakers. However, many steel players have relied on them to achieve their targets. Some of the alliances were or are, in fact, about achieving short-term goals, which partially explains the industry’s high divorce rate.

Additionally, some firms lost considerable sums of money by embarking on strategic alliances. Therefore, for companies that want to develop more successful partnerships, for ones that desire to avoid the mistakes made by their peers, and even for the ones that wish to grow only with solo investments, a report that helps them understand strategic alliances more deeply is unquestionably useful.

The report was compiled by Germano Mendes de Paula, professor of Economics at the Federal University of Uberlândia, Brazil.

For more information or to request sample pages from MBR’s
A Critical Analysis of Company Strategic Alliances within the Global Steel Industry please call +44 (0) 20 7779 8000 or email