In the business world, we sometimes hear or see companies merging. This means that the two companies merge to form a new company.
This strategy is also considered in the steel industry.
Since the country’s development vision document on the horizon of 1404, the production of 55 million tons of steel is planned, some industrial and economic experts say the merger of smaller units and the formation of steel holdings is one way to achieve this goal.
Reducing costs, complementing weaknesses and increasing strengths, increasing impact in target markets, and benefiting from the technology of other collections should be considered as advantages of integration.
*** Reduced cost
According to Mimetals, Seyed Reza Shahrestani, a member of the board of directors of the Iranian Steel Producers Association, recently said: “In the current situation of sanctions and due to the reduction of domestic steel consumption, tough competition has been formed between producers;
So we have to work on the cost and reduce costs, because otherwise, companies will be destroyed and will disappear;
Therefore, productivity must be increased and overhead costs must be reduced.
He added: “One of the factors affecting the cost price and reducing production costs is the merger of upstream and downstream companies in the steel chain.”
Because the merger of these companies creates a synergy in which the interests of all will be seen.
He stated that replacing foreign consumer parts and goods with domestic samples is also one of the existing solutions in this field, and specified: the association itself can also be used to prepare domestic samples of these goods.
*** Impacts of localization
The association can introduce companies that are reputable and have been able to succeed in localization.
Also, in the meetings held in the association for different groups, one can use each other’s experiences and knowledge and exchange information to increase productivity.
Shahrestani continued: “Transportation is another factor affecting the cost price, because its cost is not the same as in the past and has increased a lot;
Therefore, the information of this steel map created by the association itself can be used to reduce transportation costs and delivery time.
“We can help generate revenue for the industry by recycling some goods and selling them to other companies,” he said, noting that energy, water and environmental recycling are also factors influencing cost.
Also, if the localization committee in the association is more colorful and in each section is planned according to the plans of this committee, it is possible to work on many cases and reduce costs.
In the end, he stressed: “Sanctions will finally end, and in fact, this is an opportunity to strengthen us that we must use to have a say in the future when the doors of the country are opened.”
*** Challenges on the integration path
Sometimes integration brings with it problems. Including the fact that the units do not adhere to their obligations, which will have many challenges.
Another problem that can occur in unstudied mergers is when one company does not buy another, but the merger of the two companies is done with more or less equal shares, and due to cultural problems or lack of understanding of the situation and highlighting its role in Such a merger would lead to the failure and eventual loss of the two merged companies.
*** Current situation of the steel industry
The steel industry in our country has faced many challenges over the past years.
The recession of the past few years, which has led to a decline in steel demand, should be considered one of the challenges that plagues many steel companies.
In such circumstances, some of these companies do not have adequate liquidity and in addition to not advancing their development plans, they have not been able to perform maintenance of standards.
At the same time, reducing production has not been very effective for companies that have not been able to control their production costs.
In such a situation, financial institutions have little desire to provide liquidity in this industry. Under these circumstances, there are definitely golden opportunities for companies with the right financial strength to buy and merge the right companies.
Problems with liquidity supply and lack of proper market share make some companies want to merge with other better producers.
*** Concluding remarks
Since providing liquidity has become one of the main challenges in the country’s industries, it is possible to provide a basis for solving this problem by merging different companies.
Of course, integration has several other advantages, the most important of which are cost reduction, completing weaknesses and increasing strengths, increasing impact in target markets and benefiting from the technology of other collections.
smt
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