Global steel demand and Arcelormittal’s capacity adjustment

An article in bloombergbusinessweek (nov 14, 2011) describes the impact of the doubling of steel capacity in china from 2005 to 2010, the consequent global exports at cut rate prices of supply in excess of chinese demand, and its impact. Arcelormittal, the world’s largest steel producer has idled plants in Germany, Luxemborg, France, Spain and Poland, shut down plants in Leige, Belgium, cut production in the US and postponed expansion in India. This capacity reduction is expected to hold steel prices.  The article claims that Arcelormittal could rampup when demand returns, thus capture share. Does arcelormittals slack capacity provide a valuable real option for the company? Given cost rends would shutting plants in western europe be a better capcity choice? Given the dumping of chinese steel on world markets what would you anticipate will be the long run capacity choice for Arcelormittal?

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About aviyer2010

Professor
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