The Luxembourg-based steel maker Arcelor is looking for ways to expand in the North and West African markets through acquisition. After acquiring a 38% in the Chinese company Laiwu, Arcelor has settled in Morocco as it seeks to compete with its rival Mittal Steel, the world's largest steel producer, which has important operations and assets in neighboring Algeria. Arcelor is in an interesting position. Recently rival Mittal Steel launched a takeover bid targeting the company. The Luxemburg company's management says it is confident that it will be able to defeat Mittal Steel efforts.
Globally however, Arcelor acknowledges that consolidation is necessary for the industry. As such, on March 7, 2006, it acquired a 50% stake in the Moroccan steel maker Sonasid. After the acquisition is cleared, the two main owners of Sonasid will be Arcelor and Morocco's SNI.
Within the global steel industry dominated by Mittal and followed by Arcelor in the second position, Sonasid is a relatively small operation. Its annual production capacity is 1.4 million tons but actually produced less than 900,000 tons in 2004. That year, Sonasid reported sales of Euro 374 million for a net profit of Euro 76 million.
Sonasid's strength is its long product segment, which has benefited from strong growth in the construction and public works markets. Arcelor believes it can use Morocco as a platform for export to the remaining nations of North Africa and West Africa where there has been a construction boom, a trend likely to sustain in the foreseeable future. Sonasid is no stranger to Arcelor. The latter held 7.5% stake of the Moroccan company prior to its 50% stake acquisition.
While the company did not disclose the value of its Moroccan investment, it is likely to exceed the Euro 200 million mark.
© The North Africa Journal 2006
