ArcelorMittal, the world’s biggest steel company, and Brazilian industrial conglomerate Votorantim plan to combine their long steel operations in the country.
The merger will result in a producer of long steel products – which are typically used in construction and railways – with annual crude steel production capacity of 5.6 million tonnes, the two companies said.
ArcelorMittal is the largest steelmaker by output, producing around 90m tonnes last year.
Under the deal, Votorantim Siderurgia will become a subsidiary of ArcelorMittal Brasil. Votorantim, whose business interests span from zinc and cement to orange juice and banking, will hold a minority stake in ArcelorMittal Brasil.
Steel consumption in Brazil has collapsed to levels last seen a decade ago as Latin America’s largest economy has grappled with its worst recession in over a century.
The companies said the combination would generate cost, logistical and operational savings. Regulatory approval is required in Brazil, including from antitrust authority CADE.
After global steel prices plummeted in 2015 amid oversupply, ArcelorMittal last year outlined a plan to increase core profit by $3bn through 2020, partly through cost-cutting.
The Luxembourg-based this month group reported its first annual profit in five years, highlighting a recovery underway in the steel market.
Votorantim’s long steel operations in Argentina and Colombia were not included in the transaction. ArcelorMittal also operates iron ore mines in Brazil.