The Competition Tribunal heard that the Industrial Development Corporation's acquisition of Scaw Metals and Consolidated Wire Industries would result in it holding an interest in companies supposed to be competitors.
The government has expressed frustration with the lack of progress in enforcing a developmental steel pricing model and the IDC believes this transaction will pave the way to introducing more competitive prices.
The IDC has underwritten the ZAR 3.4 billion purchase, by a consortium, of Anglo American's 74% stake in Scaw Metals. The consortium includes Shanduka Resources, Izingwe Holdings and the Southern Palace Group.
Scaw produces long steel products for the mining, construction, industrial, power and rail sectors. Consolidated Wire Industries manufactures mild steel wire products for agricultural, construction and mining applications. Scaw and ArcelorMittal SA are co owners of Consolidated Wire Industries.
Allens Meshco, a manufacturer of wire and wire products, is objecting to the transaction. Mr Rick Allen, its CEO, told the Competition Tribunal that ArcelorMittal and Scaw sold 95% of all the wire rod on the local market.
His estimate that Scaw had a 20% market share in the production of wire rod was questioned by the merging parties, which argued that it was closer to 10% of the market.
Mr Allen said it should be of concern that two of the parties (Scaw and Consolidated Wire Industries) had confessed to cartel behavior in the past and that both companies, with ArcelorMittal, were being investigated for anticompetitive conduct in the steel industry.
Allens Meshco had also been a focus of anticompetitive investigations by the Competition Commission during its probe into cartel activities in the wire industry.
The tribunal had allowed Allens Meshco to intervene in the hearings into Scaw, as it had been concerned about the structure of the market and had requested a supplementary report from the commission addressing issues raised by Allens Meshco.
Mr Allen says ArcelorMittal holds 80% of the entire market for steel and 50% for wire rod. He estimates Scaw's share in the wire rod market to be 20% and Cape Gate, a privately owned firm, to have 30% of wire rod sales.
Evraz Highveld Steel and Vanadium does not participate in the wire rod market.
Mr Anthony Norton, representing the merging parties, contested Mr Allen's market share allocations, saying they did not differentiate between steel products and did not take account of imports.
The Competition Commission had recommended the conditional approval of the transaction, but expressed concern about the IDC’s cross ownership in ArcelorMittal SA (7.9%), Scaw (74%) and Consolidated Wire Industries (50% plus one share).
The concern related to the possible sharing of information through the cross ownership and board representation of the IDC in ArcelorMittal and Scaw.
The conditions it set, aimed at preventing anticompetitive information sharing, had been classified confidential. The hearings continue today, and the IDC is due to argue why the deal should be allowed.
Source - www.bdlive.co.za
(www.steelguru.com)
