Fitch: Consolidation benefits steelmakers

The steel industry is benefiting from regional consolidation, and the industry should benefit from global consolidation amid mixed pricing and consumption trends, according to a Fitch Ratings' report.

The global steel industry remains much more fragmented than its suppliers, its customers and other metals industries, the agency said.

During the prolonged period of weakness in both regional and global steel consumption, consolidation was more localized and driven by the need to rationalize capacity and cost structures. "The need to improve access to resources and markets is driving consolidation on a global scale," Monica Bonar, director at Fitch Ratings, said in a written statement. "Steel companies need to build scale and diversify by market region."

Despite the growth in international trade, domestic and regional transactions will continue to dominate given the high cost of transportation and greater ability to respond to specialized orders from local mills, Fitch said.

The exceptionally strong growth in China's exports has given rise to trade tensions between China and both Europe and the United States. The central government has been revising its tariffs and taxes to curb exports as well as working to consolidate China's steel industry.

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