Brazil watchdog recommends rejection of steel merger
The superintendent of Brazil's antitrust watchdog Cade has recommended the rejection of the ArcelorMittal-Votorantim long steel operations deal, according to a note in the official gazette on Wednesday. The case now must be analyzed by the agency's plenary, the note said.
The watchdog understood that the operation affects the domestic market, and the merger of two of the country's three main long steel suppliers would eliminate a relevant competitor in a segment where the three largest companies hold more than 80% of local supply, government news service EBC reported.
Cade also noted that the decrease in steel demand due to the current economic crisis has increased the idle capacity of the already consolidated long steel producers, making it unlikely that new competitors will enter the market after the merger.
For the watchdog, there are strong indications that the operation would increase the likelihood of collusion in the analyzed markets, stimulating the formation of a cartel in the domestic steel market.
Furthermore, the report said, ArcelorMittal's acquisition of Votorantim's long steel arm would increase the power of the merged company to put pressure on the reduction of scrap prices in Brazil's southeast, harming small scrap suppliers in the region.
In response, ArcelorMittal Brasil said it has technical studies that indicate the merger will not result in increased market concentration. Votorantim affirmed the scrap market should be analyzed nationwide, the report said.
MERGER
In late-February, ArcelorMittal Brasil and Brazil's Votorantim announced a merger of their local long steel operations. The move would result in combined crude and rolled steel capacities of 5.6Mt/y and 5.4Mt/y, respectively.
Under the deal, Votorantim Siderurgia, the steel arm of Brazilian conglomerate Votorantim, would become a subsidiary of ArcelorMittal Brasil, the local long-steel unit of Luxembourg-based ArcelorMittal. Votorantim would hold an undisclosed minority stake in ArcelorMittal Brasil, the firms said in separate releases.
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