Bird Of Steel

A pension fund from Turkey rescues British Steel

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What's going on?

Its a bird! Its a plane! Its a military pension fund-owned investment group from Turkey thats agreed to buy the recently insolvent British Steel! Whoosh! (Tweet this)

What does this mean?

Brexit proved to be British Steels arch-nemesis, weakening it to the point of collapse: European orders vanished faster than a speeding bullet amid the uncertainty, and the fall in the British pounds value after the referendum has only made raw materials costlier. For as long as the steelmakers future has been on a knife-edge, the companys 5,000 employees have dangled precariously by their fingertips while the UK government looked for a buyer to rescue them.

And then a superhero swooped in. Buyer Ataer Holding owns almost half of Turkeys biggest steel producer, and reportedly has its heat vision trained on steel acquisitions globally. Chances are Ataer will integrate its purchase of British Steel into its operations, hoping to boost its output and lower costs via synergies.

Why should I care?

For markets: Economic shrinkage could be Ataers kryptonite.
Demand for steel rises and falls with global economic growth, since it reflects how much infrastructure work is being done. So the current slowing and shrinking of economic growth suggests steel demand is likely to follow, leaving British Steel at risk of lagging sales and dwindling profits. That said, utilities companies attract investors even in an economic slowdown: people always need heating and electricity, after all.

Zooming out: Going from hero to zero.
Customer demand in the chemicals industry works the same way as for steel i.e. its cyclical. That much was clear from IMCDs second-quarter update: the chemical distribution firm and others like it in recent weeks missed investors expectations on Friday, thanks to slowing European and US growth in the late stage of this economic cycle. That may also explain why some investors walked away from the $3 billion sale of one of chemical giant BASFs businesses…

Originally posted as part of the Finimize daily email.

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