A GOVERNMENT competition watchdog is to probe a deal between two of the world's biggest steel producers.
Anglo-Dutch steelmaker Corus sold its steel sheet piling business to rival production giant Arcelor in April for an undisclosed sum.
But last week the Office of Fair Trading referred the purchase to the Competition Commission, citing a lessening of competition in the market.
OFT chairman John Vickers claimed the deal has created a merger that significantly affects the steel sheet piling market.
He said: 'The merger results in a reduction from three to two major suppliers of hot-rolled steel sheet piling in Europe. It requires further investigation by the Competition Commission.'
Mr Vickers called for the commission to look into the extent to which other forms of retaining structures, such as precast concrete, offer competitive constraint to sheet piling producers, and consider whether Corus was due to pull out of the market regardless of the acquisition.
The investigation will not directly affect the acquisition itself, but the commission could impose conditions on Arcelor to limit the impact of weakening competition in the sector.
One steel industry source claimed Arcelor would have foreseen the potential difficulties before it decided to pursue the purchase.He said: 'In these cases it is more of a problem for the purchasing company but it will have considered the likelihood of the referral and should have prepared for it.'
Arcelor said it was disappointed by the decision but added that it would co-operate fully with the investigation, which is due to be completed by the end of February 2005.
A Corus spokesman said: 'There can be no going back on the deal.The mill is closed and it cannot be brought back into use.'
He said that the commission had not yet contacted Corus but that it would be assisting fully in the investigation.
More than 150 jobs were lost when Corus closed its Scunthorpe sheet piling production mill following the deal and Arcelor announced it would not be producing steel at the plant.
It snapped up Corus' backlog of orders alongside the sales and commercial operations but is producing the sheets at its own mills on the Continent.
Last year Corus manufactured more than 150,000 tonnes of sheet piling at the mill but at the time of the sale it blamed oversupply in Europe as the key reason for its closure.