The South African ferro-chrome industry may be fighting for its survival, but the state of the industry presents an opportunity to consolidate.
When Danko Koncar, Ruukki enterprise director, urged the industry to restructure during his presentation at MB’s ferro-alloys conference in Johannesburg, he addressed the potential directly.
“Turbulent periods extend to us opportunities to restructure our businesses,” he said.
Economics dictate that a slump is the time to consolidate.
Out go the small and economically unviable. They either close down, or get gobbled up by the companies with cash, the opportunists that can stretch a little further.
Balls of steel
But restructuring means casualties, and no South African ferro-chrome company would want to see itself as unviable.
One delegate noted that whoever leads the restructuring would need “balls of steel” to deal with the shareholders, egos and agendas.
All the while sales need to continue, and the jury is still out on what to do with chrome ore exports.
Still, Koncar’s talk of restructuring got the industry talking. How would a restructuring work? Who would lead the way?
Lean, mean machine?
Koncar noted that an industry-wide restructuring could happen in any shape or form, that this has not been defined.
Indeed, a combination of Ruukki, Hernic, ASA Metals and IFM has been discussed, which, if concluded, would create a combined entity larger than Samancor, South Africa’s second largest ferro-chrome producer.
The benefits of a trimmer industry are: stronger negotiating power; a larger balance sheet; and a less fragmented, more transparent market.
All of these make a strong case for companies facing tough times.
Perhaps the South African ferro-chrome consolidation could bring about a type of cooperative, like in agriculture, in an industry that has historically never acted as an industry.
What the South African ferro-chrome industry would look like after the clean-up is anyone’s guess.
But everyone agrees the time for it is here.