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Russian Steel Producers Ready to Sweep U.S. Market
August 8, 2008 14:23

Russian steel giants are gradually expanding their presence on the American market by acquiring U.S. steel producers. No wonder, they are thought to be among potential bidders for AK Steel, the third largest steel maker in the USA.

Presently Russian metallurgical companies headed by Severstal and Evraz account for 9.1% of the American steel market, says Reuters with reference to London consulting company CRU. Novolipetsk Steel and Magnitogorsk Iron&Steel Works are the other two Russian companies boasting to control a share of the world’s third biggest steel market.

According to the Financial Times, AK Steel is interested only in spot transaction; at this the price is exorbitant. This is not the first time AK Steel is on sale: for the last two years rumors telling that United States Steel Corp, the American steel leader, and ArcelorMittal, world’s largest steel company, are motivated to acquire the company have been in the air.

 Today Russian companies have better chances to purchase another North American asset – record prices on steel products contribute considerable sums of money to companies’ gains, which may well be assigned for mergers and acquisitions.

Prices in this segment of the market are exceeding even the most optimistic expectations of analysts, showing 78% growth this year. Experts believe the present market situation is unlikely to change a lot in the nearest future.

Severstal’s expansion on the American steel market has already secured the company the 4th place in the country. Moreover, by 2012 the Russian leading steel manufacturer plans to increase capacity of its American enterprises up to 11.3 million tons of steel annually.

In case of acquiring AK Steel, Severstal’s production volume in the USA will amount to 18 million tons approximately. Besides, some mass media report another big iron ore producer, namely Cleveland-Cliffs Inc., may be sold. Severstal is regarded as one of the most potential customers.

 Severstal’s campaign to the U.S market commenced in 2004, after the company announced it had acquired loss-making Rouge Industries and placed the new asset in management of Severstal North America (SNA). The next step was to build a steel-making plant Severcorr in Columbus, capable of producing 1.3 million of high quality steel per year. Among other American assets Severstal owns WCI Steel, bought for $140 million, and Sparrows Point, acquired from ArcelorMittal for $810 million. Esmark is the latest purchase of the Russian company: the transaction has just been completed.

Evraz keeps pace with its market rival and has already acquired several American companies: Oregon Steel Mills bought in 2007 for $2.3 billion, Claymont Steel Mills, taken up in 2008 for $565 million, and IPSCO enterprises.

What can be said for sure is that the business expansion campaign led by Russian steel producers is only beginning. Next months will probably see new transactions, new mergers and acquisitions.




Olga Pletneva

Tags: Severstal Russian Steel Producers Russian companies Russian trade  

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