Outokumpu merger review is it a shock ?
The first reaction to the news that an in depth review of the planned merger between Finnish stainless steel producer and German based Inoxum was one of shock for most. But given the size and nature of the proposed merger wasn’t any surprise.
If the comments coming from Outokumpu or ThyssenKrupp are to be believed, then it was expected and presumably planned for. Anything that will give one company such a large slice of the market risks potential concerns about market control, in some countries like Germany or the UK this would probably give them more than 60% of the stainless steel market and leave customers with few other options, but what’s the alternative.
Ever since the rising Nickel price (see below) causing the boom years of 2007 and 2008 the producers of stainless steel had had difficulty making money, historically the market moves in cycles of around four years, following successful years investments is good but as more capacity comes on line prices start to slip, cut backs are made and the cycle continues. Recently this hasn’t been the case and with China a key player in the market the EU must tread carefully.
The European rule makers may see fit to propose some changes and break up for the deal to go through, but with out it it would be a major blow to the development of the market and long term may lead to many more job losses. With the shift of balance in stainless steel production I fear the EU will have no choice in backing the planned merger or risk the consequences of loosing more power and ultimately jobs to China.