ThyssenKrupp (thanks for all the elevators) and Tata Steel—two steel giants that sound more like bad Russian dance moves—have agreed to a merger that will generate $18 billion in sales.
The deal, which will take shape in 2018, will form the second largest European steelmaker and comes at a tipping point for the steel industry. One word: China.
China accounts for over 50% of all global steel production, and its near-monopolistic control has priced competition out of the market. In fact, there is so much steel pile-up, China is now trying to cut back output by 50 million tons per year.
But ThyssenKrupp and Tata aren't necessarily welding beams together by choice. The alliance offers nearly $700 million in cost synergies and increased production capacity. Even still, it'll be just a blip on China's all-encompassing steel radar.
Case in point: new alliance—21 million tons per year vs. China—74 million tons per month.