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Severstal puts Trinidad and Tobago plant plan on hold
September 13, 2012 / 12:02 PM / 5 years ago

Severstal puts Trinidad and Tobago plant plan on hold

MOSCOW (Reuters) - Russian steelmaker Severstal (CHMF.MM) has frozen plans to build a $500 million iron ore processing plant in Trinidad and Tobago and is not planning major investments while markets remain sluggish, the head of its North American unit said on Monday.

The company, controlled by billionaire Alexei Mordashov, has two U.S. mills and earlier this year said it was planning a final decision on the construction of an iron ore facility in the Caribbean state, an exporter of oil and liquefied natural gas which has seen some large-scale investments in its steel industry.

“We came to the conclusion that there’s not much sense in building a new plant, given the amount of capex ... so we decided to put it on hold,” Sergei Kuznetsov, CEO of Severstal North America, told Reuters by phone.

In the United States, where German steel major Thyssenkrupp (TKAG.DE) is selling its major plant and U.S. steelmaker RG Steel has filed for bankruptcy, Kuznetsov said Severstal was not considering any major investments and was not interested in acquiring Thysenkrupp’s Alabama mill.

“We have spare production capacity at our two sites (in Mississippi and Michigan) which have seen decent investments, have enough raw materials and good contracts,” he said.

“If there are some investments, they will be some pinpoint spendings, some downstream projects, but we are not planning any major acquisitions.”

BOOKINGS IMPROVE

Severstal, along with other Russian steelmakers, invested heavily in the U.S. market before the 2008 recession. It had to sell some of its assets amid pressure on its profits, completing the divestment of three mills in 2011.

ThyssenKrupp said last month it planned to sell its U.S. and Brazilian mills separately for not less than book value, which is about 7 billion euros ($8.8 billion).

Severstal North America, which reported a slight drop in revenue to $1.06 billion in the second quarter from $1.10 billion in the first, said it could start to restore output in 2012.

“There was a price correction of 7 to 8 percent (in the U.S. steel market in the third quarter) and we have not reached the level we reached in the first and second quarters,” he said.

“Meanwhile bookings have improved in August and we see good levels in September as well ... We see growth in shipments and revenue in 2012.”

Kuznetsov said the company had seen a slower uptick in the U.S. auto industry’s consumption of steel products than it had anticipated, but was still expecting growth at an average of 5 percent each year for the next five years.

He said the U.S. market for construction steel would likely grow by between 2 and 2.5 percent a year until 2017.

Severstal has pinned its hopes on growth in the U.S. energy sector, taking advantage of the shale gas boom and proximity of its facilities to the oil industry hub in Houston, Texas.

Editing by David Holmes

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