Russia's expansion in steel

Here is a useful overview of Russia's recent involvement in the international consolidation of the steel sector, provided by the Steel Guru. The authors suggest that this Russian expansion is likely to continue...

Russia's steel oligarchs have been quietly shifting across their borders over last few years. Mr Alexey Mordashov of Severstal bought bankrupt US steelmaker Rouge Industries for US 254 million dollars in 2004 and he also acquired Italian steel producer Lucchini for Euro 430 million. Mr Alexander Abramov of Evraz has taken over Italy's Palini e Bertoli and the Czech Republic's Vitkovice mill. Mr Vladimir Lisin of Novolipetsk has bought Dansteel in Denmark. Mr Alisher Usmanov owner of Ural's Steel took a 13.4% stake in Corus.

But the steps have been small as compared to Russia's richest man Mr Roman Abramovich's US 3 billion dollar involvement in Evraz and Mr Alexey Mordashov's Arcelor deal, which shows that Russian steel is going global while the steel industry is consolidating.

Although Russia ranks alongside Brazil and India as the lowest cost steel producer in the world, these moves could be prompted due to quota issues for finished steel from EU. Buying a steel plant in a European country allows Russian producers to export semi finished steel, which has no quota, finishing it off at their own Western and Eastern European plants and escaping quotas while still keeping the bulk of the margins. Russians are also keen to shift their wealth out of Russia, where they are vulnerable to a change in government. Moreover, with the steel industry consolidation almost completed at home, the best growth prospects are international.

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