Proposed Acquisition of Shares in HG Metal Manufacturing Limited by Green Esteel Pte Ltd

Notifying Parties:

Green Esteel Pte. Ltd. and HG Metal Manufacturing Limited

Notifying Date:

6 June 2024

Summary of transaction:

(i)     the names of the merger parties;

• Green Esteel Pte. Ltd. (“Esteel”);

• HG Metal Manufacturing Limited (“HG Metal”)

(collectively, the "Parties", each a “Party”).

(ii)     a description of the transaction;

The Proposed Transaction concerns the proposed placement and subscription by Esteel of 34,000,000 new ordinary shares in HG Metal, with Esteel having a resultant interest of no more than 29 per cent. in HG Metal.

(iii)     a description of the business activities of the merger parties worldwide and in Singapore;

Esteel

Esteel’s principal activity is investment holding and the trading of iron ore and hot briquetted iron.

Among its investments, Esteel holds a majority interest of 61.16 per cent. (as at 19 December 2023) in BRC Asia Limited (“BRC”).

The principal activities of BRC as set out in BRC’s Annual Report 2023 are: (a) the prefabrication of steel reinforcement for use in concrete, trading of steel reinforcing bars (“rebars”), and manufacturing and sale of wire mesh fences; and (b) the principal activities of BRC’s subsidiaries include prefabrication, trading and manufacturing and sale of steel products, trading and distribution of steel products, as well as property development and investment.

The Parties submit that BRC is not directly, or indirectly, controlled by Esteel, within the meaning of “control” under the Competition Act 2004.

HG Metal

HG Metal’s principal activities are the business of trading of steel products, and investment holdings, while the principal activities of its subsidiaries are the business of manufacturing and supply of steel material to the construction industry, and investment holding. The core types of products sold by HG Metal in Singapore are structural steel products, rebars, cut and bend rebars (“Cut and Bend”), rebar mechanical splice and thread, steel welded wire mesh (“Mesh”), and prefabricated reinforcing steel products (“Prefab”).

(iv)     a description of the overlapping goods or services, including brand names;

The Parties submit that Esteel and HG Metal do not offer any overlapping goods or services.

Based on publicly available information on BRC’s website on the products supplied by BRC in Singapore, the Parties submit that the types of products which HG Metal and BRC both supply in Singapore are:

(1) rebars;

(2) Cut and Bend;

(3) Prefab, which includes prefabricated cage;

(4) Mesh; and

(5) Structural steel products.

(v)     a description of substitute goods or services;

In respect of the types of products which HG Metal and BRC both supply in Singapore, the Parties submit that:

(1) From a demand-side perspective, these generally constitute basic construction materials, and the substitutes are the products of alternative suppliers.

(2) From a supply-side perspective, it is not common for suppliers to switch from supplying one type of reinforcing steel product to another, although it is not insurmountable for a motivated supplier to do so. As for structural steel products, distributors / stockists have the ability to, and do, stock a range of structural steel products, as well as bring in ranges that they may not have distributed before, if customers have a specific request.

(vi)     The applicant's views on:

          a. definition of the relevant market(s);

The Parties submit that Esteel and HG Metal do not offer any overlapping goods or services, and accordingly, there are no applicable relevant markets for the purposes of CCCS’s assessment.

For completeness, The Parties submitted, in respect of the types of products which HG Metal and BRC both supply in Singapore, that the relevant markets are the processing and distribution of: (1) processing and distribution of rebars, and Cut and Bend in Singapore; (2) processing and distribution of Mesh in Singapore; and (3) processing and distribution of Prefab in Singapore, and (4) distribution of structural steel products globally.

          b. the way in which competition functions in this market;

Nature of competition

The Parties submit that suppliers engaged in the processing and distribution of rebars, Cut and Bend, Mesh and Prefab in Singapore compete intensely on price, as these markets are generally characterised by significant competitive constraints imposed by competitors, as well as strong countervailing buyer power.

The Parties also submit that the structural steel market is fragmented, and market players compete intensively with each other on price.

          c. barriers to entry and countervailing buyer power

Barriers to entry

The Parties submit that there are no import restrictions applicable to reinforcing steel products, where suppliers are free to source for raw materials from any non-UN-sanctioned countries. Additionally, there are no planning restraints, technology, R&D requirements, regulatory barriers, intellectual property rights, availability of raw materials, or length of contracts that would affect entry.

The Parties also submit that there are generally no planning restraints, technology, R&D requirements, regulatory barriers, import restrictions (tariffs, licensing, quarantine), IP rights, availability of raw materials, length of contracts that would affect entry in relation to structural steel products. 

Countervailing buyer power

The Parties submit that within existing contracts for reinforcing steel products, there have been instances where customers have switched suppliers due to the original supplier being unable to cope with the project demand. Additionally, due to the price competitive nature of the markets, customers are generally able to exert their bargaining power to secure the lowest possible market prices.

The Parties also submit that in respect of structural steel products, there are minimal costs involved in switching between suppliers. Accordingly, customers are generally able to switch between suppliers to, amongst others, obtain the most competitive prices for the products they required.

          d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

Non-coordinated effects

The Parties submit that the Proposed Transaction will not give rise to non-coordinated effects, as Esteel and HG Metal do not offer any overlapping goods or services and accordingly, the structure of the relevant industries would remain unaffected by the Proposed Transaction.

Coordinated effects

The Parties submit that the Proposed Transaction will also not give rise to coordinated effects. Esteel and HG Metal do not offer any overlapping goods or services, and in the absence of any horizontal overlaps, the structure of the relevant industries would remain unaffected by the Proposed Transaction, such that there will not be any change in the markets to incentivise coordination of behaviour by other market players.

Vertical effects

The Parties submit that there is no existing vertical relationship between Esteel and HG Metal.

 Decision

22 August 2024

Following its assessment, CCCS has concluded that the Proposed Transaction, if carried into effect, will not infringe the section 54 prohibition of the Competition Act 2004.

Read the Media Release.

Read the Grounds of Decision.