New York Times – by Stanley Reed
LONDON — Severstal, the Russian steel maker, said on Monday that it had agreed to sell two steel facilities in the United States to two of its American rivals, Steel Dynamics and AK Steel, for more than $2.3 billion.
Severstal invested heavily in the two locations in an international expansion drive before the financial crisis and is now trying to cut costs in an effort to stem losses.
The company said it would sell a facility in northeast Mississippi called Severstal Columbus to Steel Dynamics, which is based in Fort Wayne, Ind., for about $1.6 billion. Severstal will sell another large plant in Dearborn, Mich., to AK Steel, which is based in West Chester, Ohio, for $700 million.
The sale comes as tightening sanctions by the United States on Russia in response to the crisis in Ukraine are creating concerns about whether Russian companies will be able to continue to access loans and other financial tools in the West.
The sale, however, is likely to have been prompted more by Severstal’s own struggling business. For the first quarter of this year, Severstal reported a $100 million loss on revenues of about $3 billion. The company said that it had been trying to sell the American plants since late last year.
“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,’’ Alexey Mordashov, Severstal’s chief executive, in a statement.
Jeff Largey, a steel analyst at Macquarie Securities in London, said that the deals should benefit American steel makers by giving them more pricing power.
“I think this is a positive development for the U.S. steel industry,’’ he said in an email Monday. “It leads to further consolidation of the market by U.S. producers.’’
The American companies are taking advantage of what they believe are opportunities to snap up good assets cheap. Steel Dynamics said in a statement that it was gaining “one of the newest and most technologically-advanced mini-mills in North America.’’
Steel Dynamics said the purchase would add about 40 percent to its annual steel shipping capacity. AK Steel said that the Dearborn facility would boost its efforts in flat steel sheets for the auto and appliance markets, which have seen strong demand in North America.
Other foreign producers have also run into difficulty in North America. After huge losses on facilities in the United States and Brazil, the German steel maker Thyssen Krupp late last year sold the steel finishing mill it had built in in Calvert, Ala., to a joint venture of ArcelorMittal and Nippon Steel & Sumitomo Metal for $1.55 billion, substantially less than it cost to build the plant.