What is a steel industry due diligence?

We often get asked – what is a steel industry due diligence study?

I would answer as follows. A steel due diligence is a review of a steel business, that reports on certain key techno-commercial characteristics. If you want to put money into a steel business, you are likely to want a due diligence study that covers market, technical, financial issues. Sometimes, environmental issues are included in this list as well.

So the due diligence study typically consist of a visit from several steel experts [e.g. market, technical, financial, environmental] who each look at the main issues under their expert topic. For example, a market expert will look at the steel market today and tomorrow; will consider market requirements in terms of size, quality and shape; review competition; consider future investment; project current and future sales and market share; assess steel prices today; establish future steel price trends; project current and future revenues; review steel distribution arrangements etc. Once the expert visits the steel plant and talks to management about the relevant issues – and often validates these by speaking to customers – he or she typically then prepares a written report on this topic. That market report – together with similar technical, financial, environmental or other chapters – is an important chapter in the final due diligence report.

A well-prepared due diligence report will of course be internally consistent. Therefore, sales assumptions in the market study will relate to production levels in the technical study; both sales and production volumes will also relate to the financial assessments describing fixed and variable costs; and so on.

A due diligence report should also be independent. This is important, because if financiers are to have confidence in the written opinions contained in the report, it is important that such opinions are objective and unbiased.

To learn more about how our consultants can help in preparing a due diligence or feasibility study, visit http://www.steelonthenet.com/consulting.html.

Dr Andrzej M Kotas

Chief Executive

http://www.steelonthenet.com