ThyssenKrupp denies aborting Steel Americas sale
03 Sep 2013
German steelmaker ThyssenKrupp yesterday denied a media report that it plans to scrap the sale of its loss-making Steel Americas business and instead focus on increasing its equity capital.
Citing unidentified company sources, German newspaper Frankfurter Allgemeine Zeitung said that ThyssenKrupp's management may call off plans to sell its Steel Americas business and will inform the supervisory board at the meeting to be held today.
A company spokesman denied the speculation and said the sale process is continuing.
Since May, ThyssenKrupp, Germany's largest steelmaker has been in talks to sell its majority stake in its struggling steel mill in Brazil to Companhia Siderurgica Nacional (CSN) after it emerged as the lead bidder.
ThyssenKrupp holds a 73.13-per cent stake in the Brazilian plant known as CSA, while the remaining 26.87-per cent is held by Brazilian mining giant Vale SA.
CSA comprises steel-slabs plant in Rio de Janeiro and a processing plant in Alabama in the US.
A joint venture between ArcelorMittal and Nippon Steel & Sumitomo Metal Corp is the lead bidder for ThyssenKrupp's Alabama plant, but CSN wants the Alabama plant to be included in the deal.
Last week, Reuters reported that CSN was not interested in the deal if the Alabama plant is not included in the transaction.
ThyssenKrupp started operating its CSA steel-slabs plant in 2010, which has a capacity to produce five million tonnes of steel annually.
The construction of the plant in Alabama was one of the company's biggest ever foreign investments in the US. It spent $5 billion in 2010 in the overall complex, including $3.6 billion on the carbon flat steel facilities and $1.4 billion on the stainless area.
Due to cost overruns, the overall cost of building the plants in Brazil and Alabama were nearly €10 billion, much above its original estimates of €8.3 billion.
The company took a €2.9-billion ($3.7 billion) impairment charge in the Q4 fiscal of 2011 attributable to both mills when it reported a loss.
In 2007, the steelmaker had developed a strategy for Steel Americas based on two basic premises - slabs were to be produced in low-cost in Brazil and shipped with cost advantages to the US. After processing they would then be sold in the North American market.
Global steelmakers have recently come under pressure to cut costs with demand slowing faster than expected, especially in Europe and China.
But the sale has run into several problems, including a demand from Vale to paid $550 million as compensation for the cost overrun and technical problems at the steel slab plant in Rio de Janeiro.
The Essen-based steelmaker has valued CSA at €3.4 billion in its books but analysts feel that the company may not get even the book price, although it has spent €10 billion on this business over the past eight years.
