China Could Soon eclipse US and Indian Steel Producers
MTN, a South African producer of oil and gas, has partnered with Germany’s ThyssenKrupp to form a new company in Africa. The company is led by Managing Director Mathieu van Praag and ex SAP employee Alfred Hanspahler. MTN is currently exploring for more crude steel deposits in Chad, Nigeria, South Africa, the United Arab Emirates and Pakistan. At the moment, ThyssenKrupp is the world’s third largest producer of metal, following behind Russia’s Kogashty Nuclear Plant.
The management anticipates an increase in its share of the global steel production market in the coming years. Recent economic indicators in China have been positive for MTN, but analysts believe that Chinese demand will only rise or remain flat in the next two to three years. In contrast, MTN’s main competition from Sweden’s Saeco and Germany’s ThyssenKrupp are both focusing on the high-volume production of small-sized steel units. China is currently the largest buyer of MTN supplies but has not expressed any intention of purchasing any of the Company’s products sun onsen village limited edition.
The steel producer also produces power blocks and other components. It has five steel mills across four countries that produce both galvanized and non-galvanized coils. Steel production continues to be a strong division within MTN and the Company expects to have around one thousand employees by the end of 2021. Some of the steel mills are based in Africa and are operated by locally-based workers who commute between the plants.
MTN’s strategic plans, including expansion, are aimed at strengthening its position as a world leader in the steel industry. This is necessary as steel prices continue to remain volatile. According to a recent forecast by The Boston Consulting Group, MTN is expected to post profits for the next three years, but this outlook does not take into account the current turmoil in the financial markets. A recent article by the World Steel Association (WSA) predicted that Indian steel manufacturers Ansal and Mahindra could together force MTN into bankruptcy. However, MTN is the fourth largest steel manufacturer in the world and its market value is more than twice as big as that of Ansal and Mahindra, making it too large a risk to invest in.
China is another important steel exporter and China has been identified as the world’s leading manufacturer of low carbon steel. In addition, China has overtaken the U.K. as the second largest steel producer, following Germany. It is estimated that China will soon overtake U.K. as the largest steel exporter in the wake of the global economic crisis. A recent article in CNET highlighted the challenges facing Chinese steel exporters, including sourcing suppliers who can meet MTN’s high quality standards, but are not willing to meet the elevated costs associated with doing so.
A recent article in the UK’s Financial Daily newspaper highlighted the challenges associated with securing a suitable contract in the future for China. According to this article, China is unlikely to be prepared to ramp up its low carbon steel production levels as it does not face the same constraints as the U.K. or India. A potential problem for India may also arise due to the slow rate at which the country’s economy is growing, and the slower rate of Chinese economy growth. One possible solution could be a contract with a steel company that provides low carbon iron and steel products that can then be supplied worldwide on a long term basis. This would allow India to compete on price and also help in diversifying its portfolio away from oil and gas.