In discussing the competing offers for Corus by Tata and CSN, the Indian and Brazilian companies respectively, there is much mention of the cheap access to iron ore and how these will make Corus´ steel production much more profitable.
This is an incorrect analysis.
Whether Corus´ steel production is profitable or not should be evaluated in its steel plants only, not outside them. That the iron ore mining operations are very profitable, given their low cost, does not and should not impact the calculation of Corus´ costs of producing a tonne of steel.
Neither of the new purchasers will help this with their mines, profits from which they are already generating for themselves by selling their iron ore at international prices to any steel maker.
To improve steel production costs, whoever wins the auction will need to improve the steel operations and cut costs.
There are no shortcuts.
Onésimo Alvarez-Moro
See article:
The logic behind the two rival offers for Corus, the Anglo-Dutch steelmaker, from Tata Steel of India and Companhia Siderúrgica Nacional of Brazil looks uncannily uniform.
Both the putative acquirers see Corus as being a rare chance for them to expand in a big way outside their home region, and both are a lot smaller than their intended prey. Each company has large and cheap feedstocks of iron ore which they could use to make the operations of Corus in Europe more profitable.
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