The Consolidating Steel Industry Essay

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In recent years, which of the five forces has become more positive for steel producers, which less so?

The most positive force for steel producers has become buyer power because of industrialization and the predominance of industrial production in the economy. This process is connected with the development of new technologies, especially in such industries as energy and metallurgy. The global car manufacturers, such as Ford, Toyota, and Volkswagen, and leading can producers such as Crown Holdings buy steel in significant amounts.

The most negative force for steel producers has become the supplier power. Iron ore is one of the main raw material for producing steel. According to the article, “The big three ore producers – CVRD, Rio Tinto, and BHP Billiton control 70 percent of the international market”. (“The Consolidating Steel Industry,” n.d., para. 5). It means that these companies can regulate the prices in accordance with their needs. In 2005, they increased the prices by 72 percent, next year – by 19 percent.

Explain the acquisition strategies of players Mittal, Tata, and Nucor

In the twenty-first century, demand for steel production has risen dramatically, there was a boom in demand, hence, steel prices have increased three times, up to $600 per one tonne. The acquisition strategies implied by Tata, Nucor and Mittal were a reaction to that situation. They bought up the weaker companies in order to increase their control over the market and increase their competitiveness. So, for instance, Mittal in 2007 has become a giant company that accounted for 10 percent of world production.

In the future, what might change to make the steel industry less attractive or more attractive?

On the one hand, the fact that people tend to spend more and more money on different types of devices, which are made from steel, must positively influence the steel industry. For instance, researches note that hydrogen-based steel production is an important future technology option (Morfeldt et al., 2015). Although, on the other hand, the substitution of steel by other materials such as aluminum, ceramics, and plastics makes the future of the steel industry look less attractive because it will inevitably lead to a decrease in demand.

Reference

The Consolidating Steel Industry Morfeldt, J., Nijs, W., & Silveira, S. (2015). The impact of climate targets on future steel production–an analysis based on a global energy system model. Journal of Cleaner Production, 103, 469-482.

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