Saturday, September 16, 2006

Russian steel firms seek foreign acquisitions

Press reports are circulating about Russian steel firms seeking further steel sector acquisitions abroad. The reports [e.g. Asia News] suggest that it is Evraz Holdings and Novolipetsk Steel [NLMK] that are especially keen on expansion in this way, and that the geography of greatest interest is the USA.

Foreign acquisitions have of course been an important element in the expansion plans of a number of ex-Soviet steel companies lately - particularly those under the control of some of the Russian steel oligarchs. Recent examples include Severstal, which bought bankrupt US steelmaker Rouge Industries for $254m in 2004 and then also acquired Italian steel producer Lucchini for Euro 430m; Evraz Holdings, which recently took over Italy's Palini e Bertoli and the Czech Republic's Vitkovice Steel; Novolipetsk which acquired Dansteel in Denmark; and the Donbass Industrial Union in the Ukraine which in late 2003 won control over Hungary's Dunaferr.

Vertical integration has also been a common aspect touching on CIS steel sector ownership changes in recent years. In Kazakhstan, upstream integration included Mittal Steel's mid-1990s purchase of the Lisakovsky Mining and Beneficiation Plant and of Atasusky GOK, both of which now supply Mittals Termitau plant. In the Ukraine, as part of Mittal Steel's end-2005 successful bid in the repeated sale of Kryvorozhstal, Mittal acquired majority ownership of the Novokrivorozhsky GOK and Artem iron ore mines. In Russia, Alisher Usmanov and partners (including Urals Steel) through Metalloinvest, took control of the Mikhailovsk iron ore mine in the late 1990s, followed later by ownership of Lebedinsky GOK, the largest Russian iron ore mine.

So in total, there is actually an awful lot that has already been happening at corporate level in the CIS steel sector. Whether as buyers or as targets, firms in Russia and the Ukraine are appearing 'on the M&A map' more and more, so we should not really be too surprised at the more recent revelations. Watch this space ...


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