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Steel Giants to Buy Alabama Plant |
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administrator |
DATE |
2013-12-03 15:53:44 |
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ArcelorMittal, Nippon-Sumitomo Venture to Buy ThyssenKrupp Facility for $1.55 Billion
ArcelorMittal CEO Lakshmi Mittal said Sunday the purchase of a steel plant in Alabama from Germany's ThyssenKrupp AG would help his company benefit from the resurgent U.S. auto industry, one of the few bright spots in the global steel business.
On Friday, Thyssen said it would sell the three-year-old steel-rolling plant in Calvert, Ala., to a 50-50 joint venture owned by ArcelorMittal, which is based in Luxembourg, and Japan's Nippon Steel & Sumitomo Metal Corp., for $1.55 billion.
ThyssenKrupp spent about $5 billion to build the Alabama plant, which mainly supplies steel to auto makers in the southeastern U.S.
Thyssen's strategy involved making raw steel at a mill in Brazil and shipping it to the Alabama plant for finishing. But that approach was undermined by rising costs in Brazil, partly caused by the appreciation of the Brazilian currency, and by lower-than-expected global steel demand.
Mr. Mittal said the new owners could improve performance at the Alabama plant by using raw steel made at its U.S. and Mexican plants rather than relying so much on shipments from Brazil. Even so, ArcelorMittal and Nippon-Sumitomo pledged as part of the agreement to buy two million tons of raw steel annually from ThyssenKrupp's Brazil mill over six years.
"Higher capacity, shorter logistics chain; I think this will help us improve the results," at the Alabama steel plant, ArcelorMittal's chief executive said. "Supply time from Brazil to the United States is quite a long time in today's market environment."
Nippon-Sumitomo said the plant will have the "capability to meet the growing needs, especially from Japanese car manufacturers" for new kinds of technologically advanced lightweight steel. Nippon-Sumitomo Steel became the world's second-biggest steelmaker by output after it was created out of the merger of Nippon Steel Corp. and Sumitomo Metal Corp. in late 2012.
ArcelorMittal accounts for about 40% of steel supplied to the North American auto market, but the company said it doesn't expect the purchase to create antitrust issues. On Saturday, however, ThyssenKrupp Chief Executive Heinrich Hiesinger said that obtaining antitrust approval for the deal could be a drawn-out process. "Considering the already dominant market position of ArcelorMittal in the U.S. [auto steel] market it is likely that authorities will take their time to look into this transaction," Mr. Hiesinger said.
Mr. Mittal said he expects the transaction to be completed by July.
He said the deal won't affect ArcelorMittal's medium-term financial target, which includes reducing net debt to $15 billion from $17.8 billion as of the end of September.
Having failed to find a buyer for the Brazil plant, ThyssenKrupp now plans to improve that factory's operating performance, partially by cutting costs, the company said over the weekend.
The company said that the slab-purchase agreement with the buyers of the Calvert rolling mill was a first crucial step in improving operating performance.
뾌an Hromadko contributed to this article.
Write to John W. Miller at john.miller@wsj.com and Alex MacDonald at alex.macdonald@wsj.com |
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