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Consolidation won''t level competition: a panel of international steel executives says better partnering between suppliers and customers should be the industry''s foremost goal in the wake of mergers and acquisitions.

Article Excerpt
Large steel buyers, such as auto and appliance manufacturers, still have the upper hand in price negotiations, despite the global consolidation of the steel industry, according to panelists at the Steel Success Strategies conference June 17 in New York, sponsored by World Steel Dynamics and American Metal Market.

Panelists discussing pricing power in the steel market included: Bruno Bolfo, chairman of Duferco S.A., a global steel trader based in Switzerland; producer J. Paul Kadlic, executive vice president, commercial, at U.S. Steel Corp.; consultant and Accenture partner John Lichtenstein; Josef von Riederer, former president of Eurometal, a European distributor association; Bud Siegel, president and chief executive officer of Russel Metals Inc., a Canadian service center; and end-user David O. Styka, senior supply manager, raw materials, at International Truck and Engine Corp.

One reason steel producers aren't gaining leverage as they gain size is that steel buyers are consolidating, too, Bolfo noted. "Big buyers also tend to become larger, including converters [such as tube makers and service centers], via mergers and acquisitions. Fewer mills and fewer customers is the trend."

While undercutting the price may become more difficult for buyers as steel production becomes less fragmented, "this buyer is still a tremendous source of income," Bolfo added.

The steel industry need look no further than aluminum "to see that higher concentration does not necessarily lead to unbridled pricing power," said Accenture's Lichtenstein. However, he added, consolidation can provide producers and consumers with an opportunity to beef up the value they create together and take collaboration to a higher and more mutually beneficial level....

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