Statistics, if misdirected, can lead to absurd conclusions. Indian Steel Industry is one such example where "high demand" forecast in late eighties and early nineties led to creation of huge capacities. The problem become more acute with the onset of global recession. In a situation where production level exceeds demand, production cut is the only lever the industry is left with. But this is not easy to apply, specially in steel plants with integrated operations, as 'economies of scale' are vital for overall cost effectiveness and profitability. The situation became more complex in excessively competitive environment, the out of globalisation of markets, merger of economies and removal & lowering of trade/tariff barriers. In spite of such a gloomy picture, there are some plusses:

• Global steel demand went up to 730 MT in 2000 as compared to 655 MT in 1990. This is 1.1% growth compounded annually. 
• The competition resulted in evolution and adoption of newer technologies resulting in improvement in quality of products at no extra cost. 
• Major steel buyers often have greater "pricing Power" leading to cheaper final products to the customer. 
• International trade in steel rose, substantially, from 167 MT in 1990 to 265 MT in 2000. 
• Steel Scrap prices declined sharply after 1998. 

The global steel industry is in the midst of a shake-out. World export prices for sheet products have nose dived and financial health of many steel companies is not good. There are worries about a recession in US (post September 11, 2001), slippage of demand in Japan and may be reduction in growth in Western Europe. 

The steel industry is in the phase of transformation. In the past, European and Japanese cartels used to determine the global steel price line. With the emergence of many developing countries as major steel producers, the cartel has broken. This led to cut throat competition. The situation worsened further with CIS countries as cheaper source of steel. 

The Asian crisis with its reflections I on global steel market dropped the prices by 40% in one single year. Perhaps the only effective way the t impact of fierce competition can be ] overcome by steel companies is the j elimination of competition itself.  But this can not really materialise. (Competition, only, can be reduced. 

Therefore to remain competitive one, has to reduce cost and improve quality. Innovation and introduction of renew products evolution, of new techniques for reduction in energy a consumption and introduction of processes for energy conservation a are some of the pointers for survival" of steel business. Mergers and alliances,  by way of making synergy in their operations reduce cost of production. One single office replacing earlier two reduces establishment cost. Less efficient operations can be eliminated and capacity can be restructured for better utilisation. Finances, possibly, can also be better managed. Therefore, the companies tending to merge expect gain from cost reduction and better prices from reduced competition. These are the reasons why such mergers and acquisitions are materializing world over. 

The companies having capability to produce high quality steel realize that remaining in ordinary grade steel market is not in their long term interest. Such considerations also lead to strategic mergers as that will reduce research and development costs and also reduce the lead time simultaneously providing larger economies of scale for customized products. 

There are signals of possible mergers of large enterprises. Even, POSCO and Nippon steel are looking at an equity swap. Thyssen-Krupp, amongst others, is eyeing CSN of Brazil. Such mergers, logically, may lead to rationalize the available capacity. 

Though there may not be any immediate effect on the commodity steel market, this trend of mergers and acquisitions, with reduced com petition, perhaps may lead to a situation of cartel formation.

"Survival of the fittest" would be the Mantra for the decade. Global steel trade will continue to increase and it is expected to touch 300 MT in 2010 against 265 MT in 2000. Demand expansion by 2-3% per year on a compounded basis is feasible. Cost reduction race will continue. Merger and acquisition activity will get a boost. Pace of technological revolution is expected to go upward thus providing special opportunities to the industry. There would be a striking balance in demand and supply thus pricing "death-spirals" may be less frequent. Role of e-commerce will be realised and transactions may amount to 200 MT by 2010. 

The global steel industry will become more dynamic in this decade. It would grow as per customers' expectations and will be in a position to serve its clients better. New technologies would continue to pose threats to the established producers. Steel makers in some regions, say China, will become stronger and others, such as those in US, may grow weaker. The decade will throw many opportunities for some to grow who are well managed and strategically positioned. It is expected that by 20 I 0, apparent consumption of steel in India will have risen to 6% per annum rate, compounded to 40 MT in 2010 against 24 MT in 2000.