EUROPEAN COMMISSION DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 25/11/2021

In electronic form on the EUR-Lex website under document number 32021M10320

EUROPEAN COMMISSION

Brussels, 25.11.2021 C(2021) 8700 final

PUBLIC VERSION

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

Aperam S.A. 12 C rue Guillaume Kroll 1882 Luxembourg Luxembourg

Dear Sir or Madam,

1.(1) On 19 October 2021, the European Commission (“Commission”) received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Aperam S.A. (“Aperam”, Luxembourg) intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of ELG Haniel GmbH (“ELG”, Germany), by way of purchase of shares (the “Transaction”). Aperam is designated as the “Notifying Party” and together with ELG as the “Parties.”

1OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the Functioning of the European Union (the ‘TFEU’) has introduced certain changes, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used throughout this decision.

2OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).

Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

1. THE PARTIES

3.(2) Aperam is a global player active in the production of stainless steel flat products, electrical and specialty alloys steel, including nickel alloys. Aperam […] the HSBC Trust (C.I.) Limited, whose beneficiaries are members of the Mittal family (“Mittal Family Trust”). […].The ArcelorMittal group has a wholly-owned subsidiary, Industeel, which is also active in stainless steel flat products and nickel alloys. Aperam’s stainless steel plants are located in Genk and Châteletand Industeel’s in Charleroi (all in Belgium) and Le Creusot (France).

3.(3) ELG is a global player active in trading, processing and recycling raw materials for the stainless steel industry, as well as high performance materials such as superalloys and titanium. ELG’s main yards in Europe are located in Rotterdam (Netherlands), Duisburg and Karlsruhe (Germany), Limay (France) and San Roque (Spain).

2. THE CONCENTRATION

4.(4) The concentration consists of the acquisition of sole control by Aperam over ELG through the acquisition of shares. The Transaction will be implemented according to the terms of the Share Purchase Agreement signed on 6 May 2021. In light of the above, the Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

3. UNION DIMENSION

5.(5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Aperam: EUR […], ELG: EUR […]). Each of them has a Union-wide turnover in excess of EUR 250 million (Aperam: EUR […], ELG: EUR […]), but they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State. The notified concentration therefore has a Union dimension.

4. MARKET DEFINITION

4.1. Introduction – metal scrap recycling

6.(6) Metal scrap is generated as a waste product, but has become an important raw material. Together with primary raw materials, it is used as an input in the production of new metal products. It is available at lower prices and carbon footprint than primary raw material, while its quality is generally comparable.

7.(7) Several steps are necessary between the collection of metal scrap and its use in new metal products, as the example of ELG demonstrates.

Form CO, paragraph 23.

Form CO, paragraph 26.

8.(8) In a first step, ELG purchases and receives scrap from numerous local and global collectors. In a second step, ELG processes the collected scrap and materials. This includes, in particular, the examination of the scrap for radiation, any other hazardous or harmful elements or hollow bodies, chemical analysis of the scrap, changing the size of the scrap, sorting / diluting impurities and finally blending the processed scrap (mix of materials) to meet the customer’s specifications. In a third step, ELG sells the processed scrap as secondary raw material to customers: in the case of stainless steel scrap, to the stainless steel industry, among others to Aperam.

9.(9) Aperam and its competitors in the stainless steel industry buy the blended stainless steel scrap and use it in the production of stainless steel products.Nickel alloy scrap is used by Aperam and its competitors in the production of nickel alloys. Titanium scrap can be used as an input in nickel alloy and stainless steel products, used in small quantities to increase resistance to so-called intergranular corrosion or increase the strength of the final product.

10.(10) ELG also collects other types of metal scrap, […]. Given that ELG’s focus is on stainless steel scrap, nickel alloy scrap and titanium scrap, and Aperam […] buys stainless steel scrap and nickel alloy scrap, this Decision will focus on these three types of scrap.

4.2. Market for the processing and blending of metal scrap

4.2.1. Product market

4.2.1.1. The Commission’s previous practice

11.(11) In previous decisions, the Commission considered whether, within the overall market for trade in metal scrap, the market segment for collecting and processing constitutes a separate market or whether collection, processing and trade of processed metal scrap belong to one single market, but ultimately left the question open. The Commission has identified a market for trade in metal scrap, which it has divided into separate markets for trade in: (i) ferrous scrap and in (ii) non-ferrous scrap.

Form CO, paragraph 72.

In the EEA, stainless steel is produced via the electric arc furnace route (“EAF”). The EAF route relies on stainless steel scrap as the main input for the production of stainless steel. Stainless steel can also be made through primary materials (iron ore, coke and limestone) through the blast furnace/basic oxygen furnace (“BOF”) route. However, this method is not used in the EEA, nor in countries such as the United States, Korea, Japan etc., due to the very negative environmental impact. See Form CO, paragraphs 539 – 541 and non-confidential minutes of a call with a customer, 26 July 2021. Carbon steel has a different production method. It is most commonly produced via the BOF route and is produced primarily through primary materials.

COMP/M.5714 – Scholz/Scholz Austria/Kovosrot, paragraph 9, COMP/M.4495 –Alfa ACCIAI/Cronimet/Remondis/ TSR Group, paragraphs 16 et seq.

4.2.1.2. The Notifying Party’s view

12.(12) The Notifying Party agrees with the Commission’s practice to distinguish between different types of metal scrap. As for the different activities, they consider that collection, processing and trading all form part of the same product market, arguing that all major players collect and process scrap metal in order to trade scrap metal. The Notifying Party also submits that no further sub-segmentation by end-use of grade of scrap is warranted, even though […] make a distinction between the stainless steel scrap grades 304 and 316.

4.2.1.3. The Commission’s assessment

13.(13) In line with the Commission’s previous practice, the results of the market investigation indicate that different types of scrap constitute different markets. The majority of respondents replied in the market investigation that stainless steel scrap and other types of metal scrap are not interchangeable in stainless steel production. As several respondents explained, primary raw materials and stainless steel scrap can be exchanged to some extent from a technical perspective, but prices and environmental impact are not remotely comparable for stainless steel production in the EEA.

One customer explained that in the EEA and other countries: “Stainless steel scrap is the main raw material in Europe and the US and other developed economies.” However, in other countries, “such as China, Indonesia, they use other raw materials (nickel pig iron etc.) and they use nickel ore and other alloys (which are in principle more expensive) and they also have mining capacities. The reason for this may be that stainless steel scrap is circular (it is recycled and reused); you only have large enough supplies of this in more developed countries…..” The same customer explained the importance of stainless steel scrap for the stainless steel industry: “In Europe and the US, with the importance of recycling and the need for

4.2.2. Non-ferrous scrap

14.(14) The Commission has also considered whether the market for non-ferrous scrap should be further segmented into sub-markets for different types of non-ferrous scrap, such as aluminium, copper and zinc scrap. However, the Commission has left this question open in previous decisions.

See e.g. COMP/M.5714 –Scholz/Scholz Austria/Kovosrot, paragraph 8, COMP/M.4469 –Scholz/Voestalpine/Scholz Austria, paragraph 10, COMP/ECSC.1358 –Scholz/Alba/Elsa.

15.(15) The Notifying Party considers that the market for non-ferrous scrap should not be further segmented, as the different types of non-ferrous scrap are interchangeable and can be used in the production of various metal products.

16.(16) The Commission’s market investigation indicates that non-ferrous scrap is not interchangeable with other types of scrap, as the different types of non-ferrous scrap have different properties and are used in different applications. Therefore, the Commission considers that the market for non-ferrous scrap should be segmented into sub-markets for different types of non-ferrous scrap.

4.3. Conclusion

17.(17) In conclusion, the Commission considers that the relevant product markets for the purposes of this decision are: (i) stainless steel scrap, (ii) nickel alloy scrap, and (iii) titanium scrap, as well as (iv) non-ferrous scrap, segmented into sub-markets for aluminium, copper and zinc scrap.

4

sustainability, everyone needs to buy as much stainless scrap as possible. Without scrap there would not be enough capacity to manufacture stainless steel.

14.(14) As for the supply side, scrap is generated as a waste product, not “produced” according to demand in the market. Therefore, the quantities of different types of scrap cannot change as a result of increase in demand. Suppliers of stainless and nickel alloy scrap are also different, which indicates that it is common in the industry to specialise on certain types of scrap. Given the lack of both demand- and supply-side substitutability, stainless steel scrap constitutes a separate market.

15.(15) The same reasoning applies for nickel alloy scrap. A majority of respondents replied that nickel alloy scrap is not substitutable with any other types of metal scrap. As a customer explained: “Substitution with primary raw materials is technically possible, but would incur a non sustainable cost disadvantage. Substitution with other types of metal scrap is technically impossible, since the chemical contents would not be appropriate for the intended production.” This indicates that nickel alloy scrap also constitutes a separate market.

16.(16) Internal documents, pre-notification calls as well as the description of the scrap industry in the Form CO however also point to a further segmentation by activity, notably collection, processing (which includes sorting and crushing of scrap) and blending. In this blending process different scrap types of different materials and alloys are mixed in a controlled process according to the customer’s specifications regarding chemical composition and physical shape. However, a majority of respondents in the market investigation suggest that the same companies are active in all mentioned stages. In the words of a stainless steel scrap supplier, “a real difference only exist in regards to smaller competitors, which focus on the trading of scrap because they are too small to process the scrap.” In addition, the market investigation also found that a further sub-segmentation of the product market, such as by grades, e.g. 304 and 316 (as well as other relevant grades) for stainless steel scrap, is not warranted.

17.(17) As regards sales to customers of stainless steel scrap, the market investigation showed that only suppliers able to supply a certain quantity sell directly to customers i.e. the stainless steel producers, whereas smaller companies are active in collection and sell the scrap to larger suppliers. Almost all of the purchases of stainless steel scrap made by stainless steel producers concerns blended stainless steel scrap.

Non-confidential minutes of a call with a customer, 26 July 2021.

Replies to question 5 of Questionnaire 3 to nickel alloy scrap suppliers. Replies to question 4 of Questionnaire 4 to nickel alloy scrap customers.

Reply to question 4 of Questionnaire 4 to nickel alloy scrap customers.

see e.g. Form CO, Annex 06.04, page 4; Annex 07.10, page 6 […]; Form CO, paragraph 75; non-confidential minutes of a call with a competitor, 9 July 2021, paragraph 10.

(Form CO, paragraph 74.) Blending is the last step before which the required mix of scrap is sold to stainless steel or nickel alloy producers.

Replies to question 7 of Questionnaire 2 to stainless steel scrap customers. Replies to question 6, 7 and 8 of Questionnaire 1 to stainless steel scrap suppliers.

Non-confidential minutes of call with a competitor, 23 July 2021, paragraph 4.

Replies to question 4 of Questionnaire 2 to stainless steel scrap customers. Replies to question 9 of Questionnaire 1 to stainless steel scrap suppliers. Replies to question 9 of Questionnaire 3 to nickel alloy scrap suppliers. Replies to question 8 of Questionnaire 4 to nickel alloy scrap customers.

Replies to question 6 of Questionnaire 2 to stainless steel scrap customers.

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18.(18) The evidence in the Commission’s file has not provided any indication that would suggest that applying by analogy the Commission’s decisional practice on titanium scrap would not be appropriate in the present case. For the purposes of this Decision, the Commission will therefore analyse the market for the collection, processing and blending of titanium scrap.

19.(19) With a view to the above, the Commission will analyse the effects of the Transaction on the basis of markets for the collection, processing and blending of stainless steel scrap, the collection, processing and blending of nickel alloy scrap and the collection, processing and blending of titanium scrap.

4.2.2. Geographic market

4.2.2.1. The Commission’s previous practice

20.(20) In its previous decisions, the Commission found the market for trade in metal scrap to be at least EEA-wide. As regards the geographic scope of the market for collecting and processing of metal scrap, the Commission indicated that the geographic dimension is smaller than that of the trade market. It left open whether the markets are national or regional with respect to collection activities where markets might be determined according to the catchment radius of each facility (possible radius of approx. 200 km).

4.2.2.2. The Notifying Party’s view

21.(21) The Notifying Party submits that the geographic market for collection, processing and trading is at least EEA-wide: especially stainless steel and nickel alloy scrap is sold and sourced at least on an EEA-wide basis while properties, market conditions and prices are similar across the EEA. This kind of scrap is, in general, a more expensive scrap product compared to other metal scrap types. Thus, transport costs play a smaller role compared to other scrap material. Moreover, large exports to India and Taiwan show in the Notifying Party’s opinion that distances are not an obstacle for the collection, processing and trade of metal scrap.

By way of example, ELG, as a larger supplier, not only collects scrap but also purchases from numerous companies active in collection, before then processing and blending scrap for sale to its customers. See paragraph (8).

Replies to question 7 of Questionnaire 2 to stainless steel scrap customers. Replies to question 8 of Questionnaire 1 to stainless steel scrap suppliers.

See e.g. COMP/M.4495 -Alfa Acciai/Cronimet/Remondis/TSR Group, paragraph 27 et seq. COMP/M.5714 –Scholz/Scholz Austria/Kovosrot, paragraph 11, COMP/M.4781 –Norddeutsche Affinerie/Cumerio, paragraphs 25 et seq., COMP/M.6541 –Glencore/Xstrata, paragraphs 246 et seq., COMP/M.4469 –Scholz/Voestalpine/Scholz Austria, paragraphs 14 and 15.

4.2.2.3. The Commission’s assessment

22.(22) In line with its previous practice, the Commission considers that collection of different metal scraps takes place on a narrower scale than the supply of this scrap to customers. A slight majority of stainless steel scrap suppliers active in the collection of stainless steel scrap replied that they usually travel between 100 and 500km from their facilities to collect this scrap.

23.(23) Processing and sale of blended stainless steel scrap can take place over longer distances, with the significant majority of suppliers processing and selling blended stainless steel scrap at distances greater than 300km, with some supplying stainless steel scrap at distances greater than 1200km. […], the Parties’ data also shows that […]% of sales from ELG’s yard occur within a catchment area of approximately […] km. A minority of suppliers are active in smaller catchment areas, ranging from only 50 km to 50-300 km.

24.(24) Market participants stressed that the mode of transport (i.e. by truck, trail, barge, or ship) plays a key role for costs and hence the radius in which stainless steel scrap is sourced. A majority of customers indicated that prices of stainless steel scrap differ according to the location. In the words of a supplier, “prices are reliant upon freight costs, no matter if [stainless steel scrap] is being purchased or sold.” Both suppliers and customers of stainless steel scrap pointed to location as a key factor determining prices. The market investigation indicates that the main driver for the geographic area over which stainless steel scrap suppliers are active is the location of the customers. As noted by one supplier, “we do have all kind of distances depending on where our suppliers and customers are located.” These distances can be short, depending on the proximity of the scrap yard to the steel mill, or very much further. As noted by one stainless steel scrap supplier, “the routes to Outokumpu (Tornio) and Acerinox (Algeciras) are really long!”. For this reason, and due to the important role played by transport costs in the delivery of stainless steel scrap, one suppliers notes: “the main rationale behind opening a new yard always is: ‘go where the scrap or the customer is’.” As noted above at paragraph (23), some smaller stainless steel scrap suppliers are only active at distances of less than 50km or 300km. One such supplier explained that, “our customers are situated very close to our facilities, less than 50km in the most of cases.”

44 Replies to questions 13 and 14 of Questionnaire 1 to stainless steel scrap suppliers.

45 Replies to questions 13 and 14 of Questionnaire 1 to stainless steel scrap suppliers.

46 Replies to question 14.2 and 15 of Questionnaire 4 to nickel alloy scrap customers. See e.g. reply to question 15 of Questionnaire 4 to nickel alloy scrap customers : “Higher transport costs due to longer transport routes increase our purchase prices if our competition is closer to the supplier. Proximity to the supplier therefore has a competitive advantage. But transport costs are not the decisive element.”

47 Non-confidential minutes of a call with a competitor, 2 September 2021.

48 See Case M.7839 - Outokumpu / Hernandez Edelstahl, paragraph 25; M.7138 – ThyssenKrupp / Acciai Sepciali Terni/ Outokumpu VDM, paragraph 10 et seq.

49.(49) speciality steels and (iv) electrical steel. As to the physical shape, the Commission has defined separate product markets for long steel products and flat products. Within flat stainless steel products, the Commission has further distinguished between: (i) hot rolled and (ii) cold rolled steels. As regards hot-rolled products, a potential segmentation between hot black band and hot white band steels was left open. Within long steel products, the Commission has left open whether to further distinguish between: (i) ingots and billets, (ii) wire rod, (iii) hot rolled and forged bars, (iv) bright bars and (v) drawn wire. Moreover, the Commission has defined a separate market for stainless steel quarto plates and has defined a separate market for stainless steel precision strip.

31.(31) The Commission has considered a separate product market for production and sale of nickel alloys. Based on the shape, the Commission considered a further segmentation in relation to product categories such as strips, plates, wires and bars.

4.3.1.2. The Notifying Party’s view

32.(32) The Notifying Party submits that there is no need to draw conclusions on the exact scope of the relevant product markets, as no competition concerns arise irrespective the market definition.

4.3.1.3. The Commission’s assessment

33.(33) The evidence in the Commission’s file has not provided any indication that would suggest that applying the Commission’s decisional practice on stainless steel products and nickel alloy products would not be appropriate in the present case. For the purposes of this Decision, the Commission will analyse the markets for: (i) production and wholesale of stainless steel flat products as well as for (ii) nickel alloy products.

34.(34) The stainless steel markets where Aperam is active are (i) production and wholesale of stainless steel flat hot rolled black band products, (ii) production and wholesale of stainless steel flat hot rolled white band products, (iii) production and wholesale of stainless steel flat cold rolled products and (iv) production and wholesale of stainless steel welded tubes.

35.(35) The nickel alloy markets where Aperam is active are (i) production and sale of nickel alloy semis, (ii) production and sale of nickel alloy bars, (iii) production and sale of nickel alloy wire, (iv) production and sale of nickel alloy wire rod, (v) production and sale of nickel alloy strip and (vi) production and sale of nickel alloy “plates and sheets”.

49 See Case M.8159 - ArcelorMittal / Cellino / JV, paragraph 13; Case M.7155 – SSAB / RAUTARUUKKI, paragraph 22; Case ECSC 1351 Usinor /Arbed/Aceralia, paragraph 13.

50 See Case M.7155 – SSAB / RAUTARUUKKI, paragraph 23; COMP/M.7138 – Thyssenkrupp / Acciai Speciali Terni / Outokumpu VDM, paragraph. 7.

51 See COMP/M.7138 – Thyssenkrupp / Acciai Speciali Terni / Outokumpu VDM, paragraph 7; Case M.8159 - ArcelorMittal / Cellino / JV, paragraph 15.

52 COMP/M.7138 – Thyssenkrupp / Acciai Speciali Terni / Outokumpu VDM, paragraph 8; Case COMP/M.6471 – Outokumpu/Inoxum, paragraph 136.

53 See Case M.7273 - GERDAU EUROPE / ASCOMETAL, paragraph 24; Case M.6962 - RENOVA INDUSTRIES / SCHMOLZ+BICKENBA CH, paragraph 16.

54 Case M.5211 - Outokumpu / Sogepar, paragraph 11; Case M.4137 - Mittal /Arcelor, paragraph 21 et seq.

55 Case M.6471 – Outokumpu/ INOXUM, paragraph 201 et seq.

56 See Case M.1080 - Thyssen / Krupp, paragraph 17.

57 Form CO, paragraph 147.

41.(41) The Transaction also gives rise to a vertically affected market in collection and processing of titanium scrap (an input for nickel alloy products) in the EEA, assessed in Section 5.4 below.

5.1. Legal framework

42.(42) According to the Commission’s Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings (“Non-horizontal Merger Guidelines”), foreclosure effects may occur where actual or potential rivals' access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing these companies' ability and/or incentive to compete.

43.(43) In assessing the likelihood of an anticompetitive input foreclosure scenario, the Commission examines, first, whether the merged entity would have, post-merger, the ability to substantially foreclose access to inputs, second, whether it would have the incentive to do so, and third, whether a foreclosure strategy would have a significant detrimental effect on competition downstream.

44.(44) In assessing the likelihood of an anticompetitive customer foreclosure scenario, the Commission examines, first, whether the merged entity would have the ability to foreclose access to downstream markets by reducing its purchases from its upstream rivals, second, whether it would have the incentive to reduce its purchases upstream, and third, whether a foreclosure strategy would have a significant detrimental effect on consumers in the downstream market.

45.(45) Finally, vertical mergers may also give rise to the disclosure of commercially sensitive information regarding the upstream or downstream activities of rivals, where the merged entity may gain access to this information. For example, by becoming a supplier of a downstream competitor, a company may obtain critical information allowing it to prices less aggressively in the downstream market. It may also put competitors at a competitive disadvantage, thereby dissuading them from entering or expanding in the market.

5.2. Stainless steel scrap

5.2.1. Market shares

5.2.1.1. Upstream market – supply of stainless steel scrap

46.(46) The market for the supply of stainless steel scrap in the EEA is mostly served by three major players who are active across the EEA: Cronimet ([20-30]%), ELG ([10-20]%) and Oryx ([10-20]%). The remainder of the market is fragmented among a small number of more local players (e.g. Reinoxmetal in Spain, Derichebourg in France). This is evident from the market shares set out in Table 1 below.

62 The Parties’ activities marginally overlap in the upstream markets for collection and processing of stainless steel and in titanium scrap via Aperam’s ownership of a scrapyard in Belgium (formerly Cronimet Belgium but now called Aperam/ASB Recycling.[…]. (Form CO, paragraph 269).

63 Non-horizontal Merger Guidelines, paragraph 18.

64 Non-horizontal Merger Guidelines, paragraph 32.

65 Non-horizontal Merger Guidelines, paragraph 59.

66 Non-Horizontal Merger Guidelines, paragraph 78.

(11) The market shares set out in Table exclude so-called “internal use” stainless steel scrap as this has not been purchased from stainless steel scrap suppliers. This is stainless steel scrap that is produced by stainless steel producers as a by-product of their own production and then recycled again into their own production. See footnote 85 Form CO.

Table 1: Processing and blending of stainless steel scrap for the stainless steel industry in the EEA in terms of volume

ELG / Competitors Volume (mt) Market Volume (mt) Market Volume (mt) Market shares (%) shares (%) shares (%)

2020 2019 2018

Cronimet Group

[…] [20-30]% [20-30]% [20-30]%[…] […]

ELG [10-20]% [10-20]% [10-20]%[…] […] […]

Oryx [10-20]% [10-20]% [10-20]%[…] […] […]

Paul Jost [0-5]% [0-5]% [0-5]%[…] […] […]

Innovative Metal Recycling [0-5]% [0-5]% [0-5]%[…] […] […]

Scholz [0-5]% [0-5]% [0-5]%[…] […] […]

Stena Recycling [0-5]% [0-5]% [0-5]%[…] […] […]

Derichebourg [0-5]% [0-5]% [0-5]%[…] […] […]

Reinoxmetal [0-5]% [0-5]% [0-5]%[…] […] […]

GDE Group [0-5]% [0-5]% [0-5]%[…] […] […]

Ecore [0-5]% [0-5]% [0-5]%[…] […] […]

Aperam [0-5]% [0-5]% [0-5]%[…] […] […]

68([…])

Com.Steel [0-5]% [0-5]% [0-5]%[…] […] […]

Rizzinox [0-5]% [0-5]% [0-5]%[…] […] […]

Theo Steil [0-5]% [0-5]% [0-5]%[…] […] […]

Irmes [0-5]% [0-5]% [0-5]%[…] […] […]

Met.Extra [0-5]% [0-5]% [0-5]%[…] […] […]

Cometfer [0-5]% [0-5]% [0-5]%[…] […] […]

Recymet [0-5]% [0-5]% [0-5]%[…] […] […] Systems

Acciai Mella [0-5]% [0-5]% [0-5]%[…] […] […]

Soligon [0-5]% [0-5]% [0-5]%[…] […] […]

Others [10-20]% [10-20]% [10-20]%[…] […] […]

Total scrap 100% 100% 100%[…] […] […] demand

Source: Form CO, Annex 24, Table 2 (p. 2)

68 […].

(47) However, the Commission notes that these market shares do not represent the importance of the largest three scrap suppliers in the market. The large stainless steel producers consume large volumes of stainless steel scrap per month (for example Aperam sourced […]mtof stainless steel scrap in 2020 from stainless steel scrap suppliers, equating to around […]mt per month). Looking at the total volumes supplied by some of the smaller and mid-sized scrap suppliers, it is clear that it is only the larger stainless steel scrap suppliers that can fulfil the high volumes required by the main stainless steel producers. As noted by one market participant, “the market is somewhat consolidated, 4 major stainless steel producers are buying the majority of their monthly blended stainless steel scrap demand from 3 suppliers in Europe.”

(48) The importance of the largest two stainless steel scrap suppliers in particular (Cronimet and ELG) is also clear from [ELG’s internal documents].

Figure 1 – […]

[…]

(49) Further, as noted in paragraph (17), smaller stainless steel scrap suppliers do not sell directly to the stainless steel producers, as only larger stainless steel scrap suppliers are able to fulfil the buyers’ demand for large volumes. As also noted by one customer, “In the EEA there are three main suppliers of stainless steel scrap. Besides ELG, those are Cronimet and Oryx. But there are also smaller (medium) suppliers…… Besides these big and medium suppliers there are local small suppliers but these normally sell their scrap to the big suppliers.” The market shares set out in Table 1 include a large market share ([10-20]%) for “other” suppliers and which has not been attributed to any additional suppliers.

5.2.1.2. Downstream market – production and wholesale of stainless steel products

50.(50) In terms of the production and wholesale of stainless steel flat products, Aperam is, along with Outokumpu, the most important producer. As can be seen in Table 2 - Table 4 below, Aperam is either the largest or second largest competitor in the following markets.

51.(51) In the market for production and wholesale of stainless steel flat hot rolled white band products in the EEA, Aperam’s market share is [20-30]%, close to […]

(69) Form CO, Table 101.

(70) Reply to question 6 of Questionnaire 1 to stainless steel scrap suppliers.

(71) Non-confidential minutes of a call with a customer, 26 July 2021.

72.(72) Aperam is also active in production and wholesale of stainless steel flat hot rolled black band products, and production and wholesale of stainless steel welded tubes, but its market shares are in these downstream markets are below 5% at EEA-level (Form CO, Annex 26). The analysis of vertical relationships focuses on those downstream markets where Aperam’s market share exceeds 20%. In any case, the arguments why no foreclosure concerns arise are equally valid for all plausible downstream markets in which Aperam is active.

(73) Outokumpu with [20-30]% and ahead of AST with [20-30]% and Acerinox of [10-20]%

52.(52) In the market for production and wholesale of stainless steel flat cold rolled products in the EEA, Aperam’s market share is [20-30]%, only exceeded by Outokumpu with [20-30]% and well ahead of AST with [10-20]% and Acerinox with [5-10]%

53.(53) In the market for production and wholesale of stainless steel quarto plates in the EEA, Aperam’s share is [20-30]%, followed by Outokumpu ([20-30]%), SIJ Acroni ([20-30]%), Acerinox ([5-10]%) and AST ([0-5%]) (see Table 4).

54.(54) The Commission also notes that the market shares set out in Table 2- Table 4 below may not fully represent the importance of Aperam as a downstream customer. This is notably because the market shares the Notifying Party provided include sales attributed to Marcegaglia which is not active in the production of hot rolled and cold rolled stainless steel products from stainless steel scrap, as well as a significant “other” share (up to [20-30]% for some markets), which relate to imports.

Table 2: Production and wholesale of stainless steel flat hot rolled white band products in the EEA in terms of volume

2020 2019 2018

Volume (mt) Volume (mt) Market shares (%)mt)

Volume (mt) Market shares (%)mt)

Aperam […] [20-30]% […] [20-30]% […] [20-30]%

Outokumpu [20-30]% […] [20-30]% […] [20-30]%[…]

Acciai [20-30]% […] [10-20]% […] [10-20]%[…] Speciali Terni

Acerinox [10-20]% […] [5-10]% […] [5-10]%[…]

Marcegaglia [0-5]% […] [0-5]% […] [0-5]%[…]

Otelinox [0-5]% […] [0-5]% […] [0-5]%[…]

Others [10-20]% […] [20-30]% […] [20-30]%[…]

Total 100% 100% 100%[…] […] […] market

Source: Form CO Annex 24, Table 29 (p.13)

(73) Form CO, Annex 24, Table 29. Market shares for 2020 in terms of volume. In terms of value, Aperam’s market share in 2020 was [20-30]% (Outokumpu: [30-40]%, AST: [20-30]% and Acerinox: [10-20]%). Form CO, Annex 24, Table 40.

(74) Form CO, Annex 24, Table 30. Market shares for 2020 in terms of volume. In terms of value, Aperam’s market share in 2020 was [20-30]% (Outokumpu: [20-30]%, AST: [10-20]% and Acerinox: [5-10]%). Form CO, Annex 24, Table 41.

(75) Form CO, Annex 24, Table 52.

Table 3: Production and wholesale of stainless steel flat cold rolled products in the EEA in terms of volume

2020 2019 2018

Volume (mt) Market Volume (mt) Market Volume (mt) Market shares (%) shares (%) shares (%)

Aperam […] [20-30]% […] [20-30]% […] [20-30]%

Outokumpu […] [20-30]% […] [20-30]% […] [20-30]%

Acciai Speciali […] [10-20]% […] [10-20]% […] [10-20]% Terni

Acerinox […] [5-10]% […] [5-10]% […] [5-10]%

Marcegaglia […] [5-10]% […] [5-10]% […] [0-5]%

Otelinox […] [0-5]% […] [0-5]% […] [0-5]%

Others […] [20-30]% […] [20-30]% […] [20-30]%

Total market 100% 100% 100%[…] […] […]

(76) Reply to RFI 5, Q5.

Olarra […] [0-5]% […] [0-5]% […] [0-5]%

BGH […] [0-5]% […] [0-5]% […] [0-5]%

Acería de Álava (Tubacex) [0-5]% […] [0-5]% […] [0-5]%

Others […] [0-5]% […] [5-10]% […] [5-10]%

Total scrap 100% 100% 100%[…] […] […] demand

Source: Form CO, Annex 24, Table 23 (p. 10)

5.2.2. Input foreclosure

5.2.2.1. The Notifying Party’s views

56.(56) The Notifying Party submits that it lacks market power to have the ability to successfully engage in any input foreclosure strategy, as the Parties’ combined market share in collection, processing and trading of stainless steel scrap is below 30% at the EEA-level. ELG accounts for only approx. [10-20]% of the EEA-wide market for collection, processing and trading of stainless steel scrap. Customers can continue to source stainless steel scrap from strong competitors upstream, such as Cronimet Group ([20-30]%), Oryx ([10-20]%), Paul Jost ([0-5]%) and Innovative Metal Recycling ([0-5%]). Aperam’s competitors would also be able to switch easily to alternative suppliers across the entire EEA. In addition, stainless steel scrap is a commodity product mostly procured on a spot basis without any brand loyalty.

57.(57) The Notifying Party submits that it does not have an incentive to foreclose access to inputs, as Aperam would prefer to source scrap from a third party supplier in the EEA if offered at a lower price compared to ELG (e.g. because of a transport cost advantage). A strategy of sourcing scrap volumes from ELG at any price would not be sustainable for Aperam. Moreover, redirecting any volumes of ELG to Aperam’s plants will free up volumes elsewhere and not reduce availability for competitors. Given Aperam’s limited market share at the downstream level, the merged entity would not be able to materially benefit from any input foreclosure strategy. Finally, [summary of Aperam’s post-merger sourcing strategy]. Instead, Aperam’s main objective with the Transaction is to make material flows more efficient and to optimise the composition of scrap for its needs. Nevertheless, the markets are not highly concentrated and, therefore, any foreclosure strategy would have no (long-term) impact on effective competition.

5.2.2.2. The Commission’s assessment

58.(58) Stainless steel scrap is the most important input for the production of stainless steel, accounting for approximately [40-50]% of the total cost of downstream production. While the Notifying Party argues that ELG’s upstream market shares are low and could not therefore give rise to any input foreclosure concerns, the Commission notes that for at least one customer, Acerinox, which is based in Spain, ELG is an important supplier due to the particularly close proximity of ELG’s scrap yard to the customer’s steel mill.

59.(59) As observed by the Notifying Party, it is important for stainless steel producers to ensure that stainless steel scrap can be sourced locally: […] Therefore, the Commission’s investigation focussed on whether the Transaction could give rise to input foreclosure for Acerinox in particular.

60.(60) The Commission’s investigation focussed on Spain, where ELG has a scrap yard in San Roque, Cádiz, in southern Spain. This is located only 8km from the steel mill of Acerinox, one of Aperam’s main competitors. Acerinox’s mill near Algeciras, Cádiz, in southern Spain has access to a deep port facility and Acerinox sources its stainless steel scrap both by container ship (with scrap shipped from Germany or the Netherlands) and also by truck from ELG’s San Roque yard. There are advantages to ensuring this balance of supplies of stainless steel scrap.

61.(61) In terms of ability to foreclose, stainless steel scrap is an important input for the downstream production of stainless steel. The Commission’s market investigation also confirmed the importance of having scrap suppliers close to the customers’ production facilities. However, the Commission notes that Oryx, the third largest stainless steel scrap supplier in the EEA, has recently opened a scrap yard in Vilanova i la Geltrú, 40 km south of Barcelona, Spain. This scrap yard is around 1000km away from Acerinox’s facilities in southern Spain and the Commission considers that it could provide Acerinox with an alternative source of supply of stainless steel scrap that is still located on the Iberian peninsula.

62.(62) In terms of incentive to foreclose, the Commission notes that […]. Acerinox is the largest stainless steel producer in Spain. The Commission notes that any attempt to foreclose Acerinox would necessarily entail loss of sales of stainless steel scrap at the San Roque yard; Aperam’s own steel mills are located in Belgium (2,210km to Châtelet and 2,309km to Genk) [Aperam’s future sourcing strategy post-merger].

63.(63) In summary, the Commission therefore considers that any input foreclosure strategy pursued by Aperam could not have any overall detrimental effects on competition, due to the possibility of Acerinox to source from alternative suppliers of stainless steel scrap, including in particular from Oryx’s scrap yard in Vilanova i la Geltrú.

64.(64) The Commission does not consider that the merged entity would have the ability or incentive to foreclose any of the other downstream stainless steel producers. Either these producers are not currently supplied by ELG or are supplied in limited volumes or their stainless steel mills are not located in such a close proximity to the ELG yard as compared to Acerinox.

65.(65) In view of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement in relation to the vertical link between the supply of stainless steel scrap upstream and the production and wholesale of stainless steel products downstream on the basis of input foreclosure.

5.2.3. Customer foreclosure

5.2.3.1. The Notifying Party’s views

66.(66) The Notifying Party submits that it lacks market power to have the ability to successfully engage in any customer foreclosure strategy, as Aperam’s market shares in relation to production and wholesale of stainless steel are respectively below 30% at the EEA-wide level and a number of competitors with considerable stainless steel requirements remain in the market. Aperam sources stainless steel scrap from […]. In these countries there are a number of competitors including AST which has stainless steel production in Italy, the Swiss Steel Group which has several stainless steel production sites in Germany and in France, together with a number of additional stainless steel producers including Valbruna, SIJ Acroni, Sandvik, Cogne Acciai Speciali, Olarra, BGH and Aceria de Alava (Tubacex).

67.(67) The Notifying Party submits that it does not have an incentive to stop buying stainless steel scrap from other suppliers than ELG, as […].

5.2.3.2. The Commission’s assessment

68.(68) Aperam is an important downstream customer for stainless steel scrap as can be seen in Table 5. Aperam ([…]) is the second largest downstream stainless steel producer in the EEA, accounting for [20-30]% of consumption of stainless steel scrap in terms of volume in 2020. Only Outokumpu (based in Finland) is of a similar scale, with a [20-30]% share of consumption. The third and fourth players are significantly smaller, accounting for [10-20]% (AST, based in Italy) and [10-20]% (Acerinox, based in Spain) of all stainless steel scrap consumption. The next largest player accounts for [0-5]% of stainless steel scrap consumption (Swiss Steel) and the remaining [10-20]% of consumption is fragmented amongst many smaller players.

69.(69) Of the main stainless steel producers, Aperam is the only one centrally located in Europe, with its main production facilities in Châtelet and Genk (both located in Belgium) and Industeel’s production facilities in Charleroi (also Belgium) and Le Creusot (France). By contrast, Outokumpu’s steel plants are in Finland, Acerinox in southern Spain (Algeciras) and AST in central Italy (Terni). Aperam is well placed to receive stainless steel scrap from stainless steel scrap suppliers in the Netherlands and Germany where the main scrap yards are located. Due to this central location, Aperam sources the […] of its scrap within a […] km radius.

70.(70) While the Notifying Party argues that transport costs are insignificant, this is not supported by the Commission’s market investigation. For example, one scrap supplier noted that: “in terms of absolute cost, transport costs do vary significantly…within Europe. The difference – particularly in relation to the potential gross margin – shows how important the distance and the connection of means of transport between supplier and customer is.” It is clear also from data supplied by the Notifying Party that stainless steel scrap that has been transported over shorter distances incurs lower transport costs than stainless steel scrap transported over longer distances.

73.(73) Over the last five years, Aperam has […] sourced its supplies of stainless steel scrap from the largest suppliers of stainless steel scrap, namely Cronimet, ELG and Oryx. By way of example, in 2019 Aperam sourced […]% of its total stainless steel scrap supplies from ELG, […]% from Cronimet, […]% from Oryx and in 2020, […]% from each of ELG and Cronimet and […]% from Oryx. These shares of sourcing have remained […] over the last five years, with Aperam sourcing the […] volumes from ELG and Cronimet ([…] suppliers of stainless steel scrap in the EEA) and approximately […]% of its total supplies from Oryx. Aperam sources […] volumes of stainless steel scrap from the suppliers Paul Jost and Derichebourg, for example in 2019 Aperam sourced […]mt from Paul Jost and […]mt from Derichebourg and in 2020, […]mt from Paul Jost and […]mt from Derichebourg. The remainder of Aperam’s stainless steel scrap (around […]% of its total supply in 2019, […]% in 2020) is sourced from a number of smaller suppliers.

74.(74) The supply of stainless steel scrap is core to Cronimet, Oryx and Paul Jost’s business. Derichebourg is a recycling company focussed on the recycling of ferrous and non-ferrous metal and the supply of stainless steel scrap accounts for a small proportion of its total turnover.

75.(75) The Commission investigated whether, post-Transaction, the merged entity would have the ability to foreclose these suppliers, by assessing whether they would have sufficient alternatives to sell their output.

76.(76) Indeed, in light of the Transaction, market participants and in particular stainless steel scrap suppliers, have envisaged the possibility of needing to switch to alternative customers if Aperam were to reduce its purchases from them. Several are in negotiations with other downstream stainless steel producers. For example one noted that: “already today we are discussing such scenarios with our customers and the majority is prepared to increase purchase volumes and to compensate missing ELG volumes.”

77.(77) However, and as noted above, Aperam is the only major stainless steel producer that is located centrally in Europe. Suppliers that switch their sales from Aperam to alternative customers such as Acerinox, Outokumpu or AST would necessarily face increased transport costs as these suppliers are located much further away from the main stainless steel scrapyards in Germany and the Netherlands. Several suppliers therefore noted that re-arranging supplies of stainless steel scrap would increase their transport costs and would have a negative impact on their profitability.

78.(78) Despite this, the Commission has found that certain suppliers were already supplying lower volumes to Aperam than they had in the past. For example, between the years 2019 and 2021, the volumes that Paul Jost has supplied to Aperam have […]: […]mt in 2019, […] in 2020 and […] in 2021. The Commission therefore notes that it is possible for suppliers to shift their supplies to alternative customers.

79.(79) Indeed, by way of example, one supplier considered that the Transaction should not raise concerns, because even if Aperam decided to source its scrap only from ELG in the future, this would provide suppliers such as themselves alternative outlets in the future. “For the overall market, [….] does not see a problem because the quantities within the market concerning supply and demand will stay the same. Even if Aperam should decide to source its scrap only from ELG after the merger that should not dramatically change the market. This is because for the quantities that Aperam would now source from ELG there would then be other customers (former ELG customers), which would need a new supplier.”

80.(80) The Commission also notes that the Transaction takes place at a time of very strong demand for stainless steel scrap, which should ensure a high number of available outlets for scrap suppliers in Europe. Market participants referred both to a general increase in demand but also to the need to ensure sustainability by ensuring the maximum recycling of stainless steel scrap.

81.(81) On the basis that certain stainless steel scrap suppliers have already started to diversify their sales of stainless steel scrap and in the expectation that downstream customers may also need to increase their purchases from other upstream stainless steel scrap suppliers post-Transaction, the Commission considers that the merged entity would not have the ability to conduct a customer foreclosure strategy.

82.(82) In view of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement in relation to the vertical link between the supply of stainless steel scrap upstream and the production and wholesale of stainless steel products downstream on the basis of customer foreclosure.

5.2.4. Access to commercially sensitive information

5.2.4.1. The Notifying Party’s views

83.(83) The Notifying Party submits that its limited market power both upstream and downstream restricts the impact amount of transparency in the markets that any information exchange would bring about. Moreover, the lack of market power excludes a significant impediment of competition resulting from the Parties acting on the exchanged information, in particular given that the information collected would not be complete (in particular […]). Furthermore, as a reference price such as the London Metal Exchange or Fastmarkets is used for pricing, any possible information will not enable it to gain significant visibility on its competitors’ cost structure at the downstream level of production and wholesale of stainless steel products or production and direct sale of nickel alloy products.

5.2.4.2. The Commission’s assessment

84.(84) As certain market participants raised concerns that the merged entity would have access to pricing and other confidential conditions related to the supply of stainless steel scrap, the Commission investigated this claim on the basis of the legal framework outlined in paragraph (45), but considers that no concerns arise for the following reasons.

85.(85) The Commission observes that the Transaction would increase transparency in the market for the supply of stainless steel scrap […]. In particular, Aperam could receive access to ELG’s […]. ELG, via Aperam, would also receive access to […]. The Commission considers that these conditions are not transparent; as noted by the Notifying Party’s own reply, […]. Any information disclosed would nonetheless necessarily only relate to either the share of purchases made from ELG or the share of sales made to Aperam and this therefore provides a limit to the insight gained by the merged entity post-Transaction.

86.(86) However, the Commission notes that based on the conclusions on input and customer foreclosure above, market participants may take steps in order to manage any potential disclosure of commercially sensitive information. For example, downstream customers may decide to limit their purchasing from ELG in order to reduce access to potentially sensitive information and upstream competitors may also decide to redirect their supplies away from Aperam and towards other downstream customers.

87.(87) In view of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement based on access to commercially sensitive information.

5.3. Nickel alloy scrap

88.(88) No affected market arises for the vertical relationship between processing and blending of nickel alloy scrap, where ELG is active, and different nickel alloy products and stainless steel products for which nickel alloy scrap is an important input, where Aperam is active. Given concerns about input foreclosure by some market participants as a result of this vertical relationship, the reasons why the Commission considers input foreclosure unlikely will nevertheless be discussed below. With the exception of nickel alloy rod where Aperam’s market shares are still significantly below 30%, Aperam’s market shares did not exceed 10% on any of the downstream markets for which nickel scrap is used as an input. Therefore, customer foreclosure can be excluded on the basis of lack of market power.

5.3.1. Market shares

5.3.1.1. Upstream market – supply of nickel alloy scrap

89.(89) The market for the supply of nickel alloy scrap in the EEA is mostly served by two major players who are active across the EEA: Cronimet and ELG. In terms of the supply of nickel alloy scrap, ELG and Cronimet are the largest suppliers in the EEA with [10-20]% market share each. The next largest player (Siegfried Jacob) has a [0-5]% share, followed by Wyman Gordon (Caledonian Alloys) with [0-5]%. The remainder of the market is fragmented among small local players. The Commission notes that the market shares provided by the Notifying Party are based on estimates by ELG, […]. The results of the market investigation indicate that actual market shares might diverge from the provided estimates, but would not result in significantly higher market shares for ELG.

5.3.1.2. Downstream market – production and wholesale of nickel alloy products

90.(90) Aperam is the second largest buyer of nickel alloy scrap in the EEA, accounting for [20-30]% of nickel alloy scrap consumption in the EEA, after VDM Metals which accounts for [30-40]%. Other buyers account for less than [10-20]% of demand (Voestalpine with [5-10]% and Deutsche Nickel, Sandvik and ERAMET with [5-10]% each, as well as several buyers accounting for [5-10]% or less).

91.(91) In terms of nickel alloy products, Aperam’s share is relatively low in most sub-segments, with the exception of nickel alloy wire rod in the EEA where Aperam […] with [20-30]%, followed by BGH ([20-30]%), VDM Metals ([10-20]%), Sandvik ([5-10]%), Gebauer & Griller ([5-10]%), Deutsche Nickel ([0-5]%), Böhler ([0-5%]) and Carpenter Technology ([0-5%]). […].

92.(92) The Notifying Party also notes that it is not in a position to estimate the total size, its own market share, the market shares of its competitors or imports into the EEA in relation to production and direct sale of the various nickel alloy products in terms of value in the EEA in 2018, 2019 or 2020.

Table 6: Nickel base alloy scrap consumption in the EEA in terms of volume

Consumer 2020 2019 2018

Volume (mt)

Market Volume shares (%) (mt)

Market Volume shares (%) (mt)

Market shares (%)

VDM Metals […] [30-40]% […] [20-30]% […] [30-40]%

Aperam […] [20-30]% […] [20-30]% […] [20-30]%

Böhler (Voestalpine) […] [5-10]% […] [5-10]% […] [5-10]%

Deutsche Nickel […] [5-10]% […] [5-10]% […] [5-10]%

Sandvik […] [5-10]% […] [5-10]% […] [5-10]%

Aubert & Duval […] [5-10]% […] [5-10]% […] [5-10]% (ERAMET Group)

Foroni […] [0-5]% […] [5-10]% […] [5-10]%

Valbruna […] [0-5]% […] [5-10]% […] [0-5]%

BGH […] [0-5]% […] [0-5]% […] [0-5]%

Vacuumschmelze […] [0-5]% […] [0-5]% […] [0-5]%

Others […] [0-5]% […] [0-5]% […] [5-10]%

Total scrap demand 100% 100% 100%[…] […] […]

Source: Form CO, Annex 24, Table 26 (p. 12)

130(130) Form CO, paragraph 337.

Table 7: Production and sale of nickel alloy wire rod in the EEA in terms of volume

2020 2019 2018

Volume (mt) Market Volume (mt) Market Volume (mt) Market shares (%) shares (%) shares (%)

Aperam […] [20-30]% […] [20-30]% […] [10-20]%

BGH […] [20-30]% […] [10-20]% […] [10-20]%

VDM Metals […] [10-20]% […] [10-20]% […] [10-20]%

Sandvik […] [5-10]% […] [5-10]% […] [5-10]%

Gebauer & Griller […] [5-10]% […] [5-10]% […] [5-10]%

Deutsche Nickel […] [0-5]% […] [5-10]% […] [5-10]%

Böhler […] [0-5]% […] [0-5]% […] [0-5]%

Carpenter Technology […] [0-5]% […] [0-5]% […] [5-10]%

Others […] [10-20]% […] [10-20]% […] [20-30]%

Total market volume 100% 100% 100%[…] […] […]

Source: Form CO, Annex 24, Table 49 (p. 21)

5.3.2. The Notifying Party’s view

93.(93) As already shown above, the Notifying Party submits that it lacks market power to have the ability to successfully engage in any input foreclosure strategy, as the Parties’ combined market share in collection, processing and trading nickel alloy scrap is below 30% at the EEA-level. ELG accounts for only approximately [10-20]% of the EEA-wide market for collection, processing and trading of nickel alloy scrap. Customers can continue to source nickel alloy scrap from strong competitors upstream, such as Cronimet Group ([10-20]%), Siegfried Jacob ([0-5]%) and Wyman Gordon (Caledonian Alloys; [0-5]%).

94.(94) Besides, externally sourced nickel alloy scrap is in general not an as important input for the production of nickel alloy products as stainless steel scrap is for the production of stainless steel products. For producing nickel alloys, specific amounts of different metals and elements need to be combined. Such a stringent chemical composition often requires pure primary raw materials. Thus, nickel alloy products could be manufactured or effectively sold without nickel alloy scrap.

5.3.3. The Commission’s assessment

95.(95) The Commission considers that the Parties are not able to foreclose access to nickel alloy scrap. Although the market shares do not fully reflect the position of ELG in the upstream market, the results of the market investigation indicate that a large number of credible alternative suppliers are active in the upstream market. The customers who replied to the market investigation indicated that they sourced from up to ten different suppliers in the past year and could switch to most of them if ELG were to reduce their supplies and increase price and/or reduce quality of their supplies. The majority of customers described switching as rather easy. According to one respondent, a switch “would take few days and it can be done easily”. Therefore, it is unlikely that the Parties would have the ability to foreclose access to nickel alloy scrap.

96.(96) The Commission also considers that Aperam does not have an incentive to significantly increase its purchases of nickel alloy scrap from ELG. First, as explained in paragraph (94), secondary raw material cannot be easily used to substitute primary raw material in the production of nickel alloys, […]. Moreover, unlike in stainless steel scrap, […]. In 2020, Aperam’s re-using of nickel alloy scrap coming about as a by-product of Aperam’s nickel alloy production accounted for approx. […]% of Aperam’s nickel alloy’s raw material costs in the EEA. In 2019, Aperam’s re-using of nickel alloy scrap coming about as a by-product of Aperam’s nickel alloy production accounted for approx. […]% of Aperam’s nickel alloy’s raw material costs in the EEA. Finally, many important buyers of nickel alloy scrap remain in the market post-Transaction to which ELG would lose sales of nickel alloy scrap in case it restricted its supply, or supplied at worse conditions, without any benefit for Aperam. Therefore, it is unlikely that the Parties would have the incentive to foreclose access to nickel alloy scrap.

97.(97) In summary, the Commission therefore considers that any input foreclosure strategy pursued by Aperam could not have any overall detrimental effects on competition, due to the possibility of customers to source from alternative suppliers of nickel alloy scrap.

98.(98) In view of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement in relation to the vertical link between nickel alloy scrap, and different nickel alloy products and stainless steel products.

5.4. Titanium scrap

99.(99) The Transaction also results in a vertically affected market between the market for processing and blending of titanium scrap, where ELG is active, and Aperam’s activity as buyer of titanium scrap. Aperam’s share of sourcing volumes of titanium scrap for the purposes of its nickel alloy production remained below […]% in the last three years. Therefore, customer foreclosure can be excluded on the basis of lack of market power. Aperam did not source any titanium scrap for […]. Aperam’s market shares also did not exceed 30% on any of the downstream markets for which titanium is used as an input (see paragraph (91)). Given that ELG’s market share on the upstream market exceeded 30% in 2020, the reasons why the Commission considers input foreclosure unlikely will be discussed below.

5.4.1. Market shares

100.(100) The market for collection and processing of titanium scrap in the EEA has one big player with a market share of [30-40]% in 2020: ELG. The next largest players are Recymet with a market share of [5-10]%, Cronimet Group and Co.Fer.M (both [5-10]%). They are followed by SOS Metals ([5-10]%) and AmeriTi Manufacturing Company and Aerometal (both [5-10]%). Other market players do not have market shares exceeding 3%.

101.(101) The Commission notes that the Parties have very limited visibility on the market position of competitors in relation to processing and blending of titanium scrap. The Commission’s market investigation did not produce any evidence that ELG’s market power might exceed that suggested by the market shares provided by the Parties.

102.(102) Concerning the downstream market, the market shares correspond with the one for nickel alloy products (see paragraph (50) and paragraph (90)).

5.4.2. The Notifying Party’s view

103.(103) The Notifying Party submits that the Parties will have no ability to foreclose access to titanium scrap post-Transaction. […] stainless steel scrap, not on titanium which is in general not an important input for nickel alloy manufacturers. Second, nickel alloy producers can use, and easily switch to ferrotitanium (a primary alloy) and/or titanium scrap as sources of titanium. Third, given the Parties' low market shares in relation to collection and processing as well as collection, processing and trade of this scrap in the EEA, the Transaction will not negatively affect the overall availability of titanium scrap for traders or manufacturers of steel products in the EEA in terms of general availability, price or quality. Fourth, the Parties will continue to face numerous strong competitors in relation to collection and processing of titanium scrap that are not less efficient, less preferred alternatives and do not lack the ability to expand output.

104.(104) The Notifying Party submits that the Parties will also have no incentive to foreclose access to titanium scrap post-Transaction. First, Aperam is not well placed to capture the demand diverted away from Aperam’s competitors as a result of a foreclosure strategy, as titanium is not an essential input in nickel alloy scrap […]. Second,

since Aperam’s market share in any EEA-wide market segment for production and direct sale of nickel alloy products is below 30%, the Parties would not benefit from any price increases at these downstream markets.

5.4.3. The Commission’s assessment

105.(105) The Commission considers that the Parties are not able to foreclose access to titanium scrap. ELG’s market share in the upstream market for processing and blending of titanium scrap only […] exceeded 30% in 2020 and remained below 30% (at [20-30]%) in 2018 and 2019. Although ELG is the clear market leader in collection and processing of titanium scrap, numerous competitors remain in the market, accounting together for around [70-80]% of the supply of titanium scrap. Therefore, it is unlikely that the Parties would have the ability to foreclose access to titanium scrap.

106.(106) The Commission also considers that Aperam does not have an incentive to significantly increase its purchases of titanium scrap from ELG. Indeed, Aperam’s purchases of titanium scrap only accounted for […]% of titanium sourced in the EEA in the last three years. This indicates that Aperam’s demand for titanium scrap is […], also given that like nickel alloy scrap, a large share of titanium scrap is generated internally, covering a large share of Aperam’s demand (see paragraph (96)). Moreover, Aperam uses titanium scrap […], where its downstream market share does not exceed 30% in any plausible market.

107.(107) Finally, many important buyers of titanium scrap remain in the market post-Transaction to which ELG would lose sales of titanium scrap in case it restricted its supply, or supplied at worse conditions, without any benefit for Aperam. In 2020 and 2018, Aperam only accounted for […]% of ELG’s sales of titanium scrap to nickel alloy producers in the EEA and for less than […]% of its overall sales of titanium scrap. In 2019, sales of titanium scrap from ELG to Aperam were higher, but Aperam still only accounted for […]% of ELG’s sales of titanium scrap to nickel alloy producers in the EEA and for […]% of its overall sales of titanium scrap. For these reasons, it is unlikely that the Parties would have the incentive to foreclose access to titanium scrap.

108.(108) In summary, the Commission therefore considers that any input foreclosure strategy pursued by Aperam could not have any overall detrimental effects on competition, due to the possibility of customers to source from alternative suppliers of titanium scrap.

109.(109) In view of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market and the functioning of the EEA Agreement in relation to the vertical link between titanium scrap and different nickel alloy products.

149 Form CO, paragraph 294.

150 Form CO, Tables 31 and 32.

6. CONCLUSION

110.(110) For the above reasons, the European Commission has decided not to oppose the notified concentration and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Margrethe VESTAGER Executive Vice-President

30