ArcelorMittal

Last edit: 2024-12-12

In 2006 the Indian-owned Mittal Steel decided to takeover and merge with Arcelor to create the 2nd biggest steel manufacturer in the world and to have their headquarters located in Luxembourg.

The manufacturing of steel has seen some breakthroughs throughout history, but currently the steel made at one place is basically the same quality as if it was made on the other side of the planet. It does therefore make sense that steel manufacturers merge with other steel manufacturers to grow seeing as it’s pretty much a waste of time to enter new markers which are already provided for. Unless a new revolutionary breakthrough is made, this will probably remain the name of the game in the industry.

Creating an brand around a consumer product is hard work, but creating one around materials used in production is basically impossible. A plate of steel is a plate of steel. As long as the quality is consistent, no one cares where it’s made or by whom. The biggest factor in success in therefore the cost of making the plates and the costs to transport it to the buyer. The steel manufacturers which have the lowest production cost often have to compete with manufacturers which have higher upfront costs, but are closely located to the customer, which saves on transport costs and creates a more reliable supply. This is another reason why merging with other steel manufacturers can be the best way to enter new markets.

The company pays out a yearly dividends, but the amount does fluctuate year over year. The world does need steel for both construction and production, so there will always be a demand for steel, albeit in varying amounts. I would expect increasing returns in times of economic growth, which isn’t a given.