Tata Steel and thyssenkrupp will continue to work closely with the European Commission providing information and analysis after the EC yesterday announced that the proposed thyssenkrupp-Tata joint venture will face a more detailed “phase two” anti-trust review, the two companies told S&P Global Platts on Wednesday.
“Tata Steel along with thyssenkrupp continues to believe in the strong industrial logic and rationale for the proposed joint venture, and regard it as the optimal outcome for the future of its European steel business as well as for wider stakeholders in the European steel industry,” Tata Steel Europe stated in a press released Wednesday. “The business combination is envisioned as a structurally robust, sustainable and competitive company, which will be a reliable, efficient and technologically strong partner for its customers. We also remain committed to continued constructive engagement with the EC in the following months as part of the next phase of this review process.”
In a statement released Tuesday the EC said it was concerned that customers would face higher prices and fewer suppliers if the merger between Tata and thyssenkrupp was allowed to go ahead.
“Steel is a crucial input for many of the goods we use in our everyday life, and competitive steel prices are vital for the European economy,” said Margrethe Vestager, the EC commissioner in charge of competition policy. “Industries dependent on steel employ over 30 million people in Europe and we must be able to compete in global markets. This is why we will carefully investigate the impact of the planned combination of Tata Steel’s and thyssenkrupp’s steel businesses on effective competition in the steel markets.”
The EC’s initial market investigation raised several issues relating in particular to the combined companies’ market share in specialty flat carbon steel and electrical steel products, highlighting automotive applications, metallic coated steel for packaging and grain-oriented electrical steel sectors.
“It is highly likely that thyssenkrupp will be forced to dispose of remedy assets to assuage EC concerns and secure anti-trust approval,” an analyst at Jefferies International commented. “Somewhat surprisingly, ThyssenKrupp-Tata reportedly did not voluntarily offer any remedy measures in their initial application to the EC.”
The EC set March 19, 2019 as new deadline for its ruling. If the merger is approved it will create Europe’s second-biggest steelmaker, behind ArcelorMittal, producing 21 million mt/year.
As previously reported, in the recent EC review of the ArcelorMittal-Ilva merger, ArcelorMittal agreed to dispose of assets in the Czech Republic, Romania, Macedonia and Italy to satisfy competition regulators.
Len Griffin, S&P Global PLATTS