ThyssenKrupp, RG Steel may struggle to sell mills
Resource from: Thomson Reuters Likes:2982
Jun 20,2012
ThyssenKrupp AG (TKAG.DE) and RG Steel LLC may struggle to attract suitors for their steel assets while the ailing market remains mired in oversupply, costs rise and prices fall, executives at two major steel producers said on Tuesday.
Dismal market conditions combined with despair about the euro-zone's mounting debt crisis have brought the mergers and acquisitions market to an almost standstill just as five major assets in Brazil and the United States have been put on the block.
ThyssenKrupp put its 73-percent stake in CASA and its brand-new U.S. flat-rolled carbon steel mill in Alabama up for sale in mid-May after years of struggling with delays and cost overruns.
Two weeks later, RG Steel filed for Chapter 11 bankruptcy protection, a casualty of falling steel prices and oversupply in the United States. As a result it has been forced to sell its three plants, just over a year after the upstart company sealed the deal to buy and restart the furnaces.
Rather than growing output by picking up assets at discount prices, ArcelorMittal, the world's largest producer, is looking at cutting capacity, Chief Executive Lakshmi Mittal said at AMM's Steel Success Strategies conference.
"This is not the time to acquire more growth. We are not in an acquisition mode. There is enough over capacity in the world and there is enough over capacity in ArcelorMittal," he said in a Q&A session following his presentation at the conference.
The Indian billionaire, who built his steel empire through a string of acquisitions culminating with an audacious $33 billion hostile bid for Arcelor in 2006, is mulling slashing more capacity in Europe, he told Reuters on Tuesday.
The region which represented almost half of the company's 2011 output of 91.9 million tons is being roiled by over capacity and weakening demand.
And Gerdau, the largest steelmaker based in the Americas, whose main Brazilian mill sits alongside the CSA steel slab mill outside Rio de Janeiro, is investing in overhauling existing production in growing markets, such as special-bar-quality products, Chief Executive Andre Gerdau Johannpeter told Reuters in an interview.
"It's not so much new steel capacity, but to add value," he told Reuters in an interview.
SPENDING HITS A WALL
The wave of divestments sweeping the industry comes as producers try to align capacity with slowing demand growth. The global industry invested heavily in expansion projects in the last decade betting on China's voracious appetite for raw materials to feed its growing economy.
But while producers in developed economies expanded at a meteoric rate, so did China, becoming the world's largest producer and consumer of steel.
That coupled with slowing global demand growth rates has brought the industry's enthusiasm for spending to a grinding halt. Consolidation has also left some potential buyers short of cash.
Gerdau and Usiminas SA (USIM5.SA) have ruled themselves out of the bidding for ThyssenKrupp's mills, although CSN (CSNA3.SA) (SID.AT), Brazil's second-largest producer of flat steel products, has said it may take a look once the formal sale process starts.
Mittal cautioned that collapsed RG Steel, owned by Renco Group which is run by Ira Rennart, may struggle to find a good buyer for its Sparrow's Point, Yorkville and Warren plants.
Renco created the RG venture to buy the facilities from Severstal OAO (SALZI.RTS) for $1.2 billion in March 2011.
That deal raised concerns at the time that restarting idled capacity, which had been idled by its Russian owner, would derail the tentative recovery in prices and demand that was taking place at the time.
Against that backdrop, potential suitors may question how they could make the facilities work.
"There may be some problems for assets of RG Steel, where investment has not been made. There could be some difficulties to find good buyers," Mittal said.
So dire is the current market for slab that even state-of-the-art facilities like CSA may struggle to lure in suitors.
"It's a very modern asset, just recently built, but with the overall situation of overall oversupply in the world it is very hard to predict," said Johannpeter.
The latest round of divestments could be years in the making though. It took ThyssenKrupp almost two years to offload its loss-making stainless steel unit, selling it to Outokumpu Oyj (OUT1V.HE) in February.
(Thomson Reuters)
【CBCC News Statement】
1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
2.All news edited and translated by us are specially noted the source"CBCC".
3.For investors,please be cautious for all news.We don't bear any damage brought by late and inaccurate news.
4.If the news we published involves copyright of yours,just let us know.
1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
2.All news edited and translated by us are specially noted the source"CBCC".
3.For investors,please be cautious for all news.We don't bear any damage brought by late and inaccurate news.
4.If the news we published involves copyright of yours,just let us know.
Previous Powers Fasteners and Anchoring Systems has a New Distribution Partner in AFT Fasteners
Next Metallized Carbon Corporation Announces Silver Metcar Material
Next Metallized Carbon Corporation Announces Silver Metcar Material
BRIEF INTRODUCTION
Cnbearing is the No.1 bearing inquiry system and information service in China, dedicated to helping all bearing users and sellers throughout the world.
Cnbearing is supported by China National Bearing Industry Association, whose operation online is charged by China Bearing Unisun Tech. Co., Ltd.
China Bearing Unisun Tech. Co., Ltd owns all the rights. Since 2000, over 3,000 companies have been registered and enjoyed the company' s complete skillful service, which ranking many aspects in bearing industry at home and abroad with the most authority practical devices in China.
