The merger of three Brazilian independent distributors this week is a signal of a growing M&A trend in the local steel distribution market, according to Christiano Freire, president of national steel distributors association Inda.
On Monday (Dec 8) RCC Metais, Açometal and Domave announced they were joining forces, seeking cost reductions and to protect their businesses from being gobbled up by larger companies.
"There is a trend of consolidation in smaller companies," Freire said. "The smaller ones want to gain scale and market share so they can compete with ArcelorMittal (NYSE: MT), CSN (NYSE: SID) and Usiminas."
Freire said ArcelorMittal, the world's largest steelmaker, has been acquiring companies to consolidate its flat steel distribution division. The Luxembourg-based conglomerate has a 15% market share in Brazil's steel distribution sector.
In addition, Usiminas has combined its three distributors - Dufer, Fasal and Rio Negro - into one, which has a 14% market share.
CSN's subsidiary Industria Nacional de Acos Laminados (Inal) has an 11% share.
Meanwhile, Freire said independents want to obtain a market share of around 10% so they can gain scale.
Smaller companies include Zamprogna, which has an 8% market share, and Frefer - owned by Freire - which has 5%.
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