Hans-Peter Wodniok, an analyst at Frankfurt-based Fairesearch GmbH, comments on the steel industry after Tata Steel Ltd. (TATA) agreed on Oct. 20 to buy Corus Group Plc for 4.3 billion pounds ($8.05 billion), creating the world's fifth- largest steel producer.
Wodniok's comments are from an interview in German.
Asked if Tata overvalued the long-term market value of Corus, Wodniok said:
If global economic growth should slow and supply outpaces demand, ``then you may reach that conclusion.''
``At Fairesearch we expect the steel boom this year, or next year at the latest, to end its cycle. From 2008 we'll probably see steel prices falling markedly - quite simply because capacity will outgrow demand. From 2008, we may see price falls of up to 25 percent in the spot market.''
Asked about the strategic benefits of Tata's purchase of Corus, Wodniok said:
``The main advantage is a regional one. As a supplier for the car and machine-construction industries one has to be globally present to supply customers. Corus is strong in Europe, Tata in India - these are markets where one has demand. Tata will become strong in Europe. One can also imagine that Tata will seek markets in South America. Global presence is necessary.''
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