China is poised to play an important role in global merger and acquisition activities in the steel sector, according to an international industry consultant.

Nicholas J. Sowar, global steel leader with Deloitte & Touche USA LLP, said in a recent interview in Shanghai that the ongoing internal consolidation of China's steel sector was crucial to its development.

Sowar applauded the Chinese Government's policy direction on the steel sector, including reducing export value-added tax refunds, and its iron ore import licence system.

"China's efforts to make its top 10 steelmakers dominate half of its total steel market by 2010 will speed up internal consolidation," Sowar said.

As consolidation accelerates, Sowar said he believed Chinese steelmakers would become stronger and more able to acquire overseas competitors.

"The day will come soon, as top Chinese steel mills are in the process of becoming buyers," he said.

Baosteel Group, China's top steelmaker, will be a major player in steel acquisitions, Sowar said.

With years of consulting experience in steel industry mergers and acquisitions, Sowar said Baosteel should consider access to raw materials, more markets and better R&D when making acquisitions.

According to a Deloitte study, only 30 per cent of global merger and acquisition activities in the steel sector succeeded, while the vast majority, 70 per cent, failed.

Sowar praised the Mittal-Arcelor merger as an outstanding case, with both sides benefiting from shared raw materials and supplementary markets.

"The merger makes the new entity a truly global company," he said.

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