Wednesday, December 20, 2006

Steel industry still uncertain on merger

Talks between Smorgon Steel Group Limited, OneSteel Limited and BlueScope Steel Limited will recommence in 2007. Revelations of a plan that could allow Smorgon and OneSteel to proceed with their merger in spite of opposition from BlueScope Steel pushed up the value of both Smorgon and OneSteel shares. However, articles state that sources close to BlueScope Steel have indicated that it will not be pressured and that the proposed merger could still be blocked by the Australian Competition & Consumer Commission (ACCC).

Personally If I held shares in any of these companies at the moment I would be wary. There is a major chance it could be knocked back. If it is knocked back then the share price will plummet for both stocks and Bluescope will gain. If it goes ahead the stocks will get another boost but I suspect bluescopes share price might take a dive.

The steel industry is a very compeitive environment and has increased compeititon from overseas and is facing higher commodoty prices which is restricting sales and profit margins.

Good Luck investing.

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