LATIN AMERICA LONG STEEL WRAP: CSN objects ArcelorMittal, Votorantim deal

Brazil-based steelmaker CSN is questioning the acquisition of local long steel producer Votorantim Siderurgia by ArcelorMittal’s Brazilian subsidiary.

“The dominating economic rationality that motivated this operation […] seems to be the elimination of the only competitor that, with the exception of Gerdau, is able to offer effective rivalry to ArcelorMittal,” CSN said in a petition filed with Brazil’s competition regulator, Cade.

According to CSN, ArcelorMittal owned around 35-40% of the country’s long steel market in 2015, while Votorantim Siderurgia controlled about 10-15%, with Gerdau having a market share of nearly 40-45%.

CSN itself owned 0-5% of the Brazilian long steel market in 2015, following the commissioning of its 500,000-tpy mini-mill in 2014.

The deal between ArcelorMittal and Votorantim should be “prohibited” and only authorised if “it is clearly demonstrated” that “a relevant part of the benefits [arising from the agreement] will be transferred to consumers, and that the alleged positive effects of the operation would overcome its obvious negative effects and the risks to free competition in affected markets”, CSN said in the petition.

“The [acquisition] will certainly result in very high market concentration, especially in a market that is already highly concentrated,” the company added.

ArcelorMittal told Metal Bulletin on Wednesday June 28 that “Cade has extensive experience and excellent technical expertise in merger review cases and has developed sophisticated tools to assess the effects of transactions”.

“ArcelorMittal has been collaborating with Cade to discuss the existence of a high level of competition in the steel industry in Brazil, especially in the past few years, when global overcapacity has increased the pressure of global competition in local markets and three new companies have entered the market, increasing competition in the country’s long steel market,” it added.

As well as CSN, GV do Brasil (controlled by Mexico’s Simec) and Silat (owned by the Spanish company Grupo Hierro Añon) have recently put long steel units into operations.

At the end of February, ArcelorMittal’s Brazilian subsidiary signed a deal to purchase local long steel producer Votorantim Siderurgia, in a move intended to make ArcelorMittal more competitive domestically.

Under the agreement, Votorantim Siderurgia would become a subsidiary of ArcelorMittal Brasil, and parent company Votorantim would own a minority stake in the Brazilian subsidiary of ArcelorMittal.

At that time, the deal raised concerns in Brazil’s market, mostly regarding competition and prices.

The Brazilian long steel sector as a whole has been facing difficulties due to reduced demand levels, mostly from the construction industry.

As a result, national steel mills have not been able to apply price adjustments during the year, with Metal Bulletin’s monthly price assessment for rebar in Brazil being unchanged for several months at 3,250-3,410 ($982-1,031) Reais per tonne delivered.

The construction sector accounts for nearly 39% of the country’s apparent steel consumption, according to national steel institute Aço Brasil.

“No recovery is expected before the first half of next year,” a São Paulo-based long steel distributor said.

In May, long steel output in Brazil declined by 12.40% year-on-year, to 711,000 tonnes from 812,000 tonnes, Aço Brasil figures show.

Long steel sales fell by 7.50% over the same period, to 544,000 tonnes from 588,000 tonnes.