Nippon Steel Corp, the worlds second-biggest steelmaker, is asking domestic rivals to help block a hostile takeover from abroad. South Koreas Posco may buy back shares to increase its market value, and Tata Group plans to raise its stake in Tata Steel Ltd to 33.5%.
Mittal is definitely a reason, B Muthuraman, managing director of Mumbai-based Tata Steel, said of the plan to increase the groups holding by 3.2 percentage points. Lakshmi Mittal, the son of an Indian steel entrepreneur who split from the family company in 1994, has built the worlds largest steel company with iron-ore mines, steel plants and finishing mills on four continents. The biggest holes in that network are China and India, the two fastest growing nations among the worlds largest economies. That has increased pressure for mergers among Asian steelmakers.
Consolidation is the outlook for the steel sector, said Philip Miall, an analyst at Fitch Ratings in Brisbane, Australia. The global steel sector is under pressure from input costs, and steel is a highly fragmented industry. Shares of Tokyo-based Nippon Steel and Tata Steel have gained more than 30% since mid-June, when shareholders at Arcelor, previously the worlds No 2 steelmaker, indicated they would accept Mittals bid. Poscos stock has risen 11% in the period.
Mittal, the worlds fifth-richest man, plans to invest $8.7 billion to build a mill in Indias Orissa state, tapping growing demand in an economy that expanded an average of 8% in each of the past three years. We are focusing on India and China, Mittal said on July 7 in Bhubaneswar. India is a very important milestone for us to remain the biggest company in the global steel industry. Mittal spokesperson Selina Vaccarino declined to comment for this story.