The big merger news announced this week proves there is still money to be made in the steel industry - prices for steel are up substantially from a year ago and global demand continues to grow. But the really big money, however, appears to be making deals not making steel.

Consider the remarkable story of International Steel Group (ISG) and its founder Wilbur Ross, one of the players in this week's announcement of a three-way steel merger that will result in the world's largest steel maker.

A former Wall Street financier, Ross entered the steel business less than three years ago. His business model involved buying the assets of bankrupt domestic steel makers such as LTV Corp., Bethlehem Steel and Weirton Steel at fire sale prices. Because the pension obligations of the bankrupt steel companies had been shifted to the federal Pension Benefit Guarantee Corporation, Ross was able to avoid the so-called legacy costs that contributed to many of the old-line steel makers becoming uncompetitive. Beyond that, he was able to negotiate labor agreements with more flexibility in work rules that helped boost plant productivity and he also reached agreements to reduce company health care costs.

Within months of purchasing the LTV Cleveland works, ISG was making more steel (and more money) with fewer workers than when LTV operated the plant. Encouraging more cooperation from labor unions and plant workers, the operation was also quickly started paying profit sharing checks to workers.

The strategy worked and Ross' ISG became the largest steel maker in the U.S. within two years of its founding. The renegotiated labor contracts clearly helped ISG in becoming more efficient and productive. But the dumping of pension costs and reduction in other benefits was also critical to profitability.

Now, after spending $2.2 billion on five acquisitions in less than three years, Ross is selling out for $4.5 billion - a $2 billion profit for ISG shareholders and an estimated $300 million payday for Ross.

The acquiring firm, to be called Mittal Steel after the merger, has been run by India-born Lakshmi Mittal of London, who followed a path similar to Ross' in buying up undervalued steel companies across Europe and around the world.

With the massive merger expected to be approved early next year, Ross predicts it will "change the world's steel map."

That appears likely as the trend toward consolidation continues and U.S. steel makers look to establish a clearly global presence through acquisition. Analysts predict that the industry will settle down to just a dozen or so global steel making giants.

Beyond highlighting the amazing story of Ross and ISG, this merger shines something of a spotlight on AK Steel, something of an anomaly as a mid-sized steel maker without a major global partner. What the merger means for AK Steel is not known, but speculation and trends suggest that AK will need to become part of a large, global steel making operation. Even U.S. Steel, the largest domestic producer is said to be on the lookout for merger partners.

This week's merger announcement has produced a spark of life into an industry once considered sleepy and unglamorous. Ross, ISG and Mittal have proven there is plenty of life left in the steel business for the nimble, creative and acquisitive.