The world’s two largest steelmakers, ArcelorMittal (NYSE:MT) and Nippon Steel & Sumitomo Metal Corp. (TYO:5401) have agreed to jointly buy ThyssenKrupp’s (FRA:TKA) steel plant in the U.S. for $1.55 billion, in a move likely to reduce the import of raw steel into the U.S.
The purchase is expected to be financed through a combination of equity and debt at the joint venture level, ArcelorMittal said in a statement on Friday. The agreement brings to an end 18 months of bidding and negotiations involving the world’s top steel companies, according to a report by The Wall Street Journal.
The plant in Calvert, Ala., has a total capacity of 5.3 million tons, and the deal includes a six-year agreement to purchase 2 million tons of steel slabs a year from ThyssenKrupp’s integrated steel mill complex in Rio de Janeiro. But ArcelorMittal would also supply the plant with raw steel from its other plants in the U.S., indicating lesser imports of raw steel.
“The automotive market is an identified franchise business for ArcelorMittal, and the Calvert facility will complement ArcelorMittal’s existing auto business in the United States,” the Luxembourg-based company said.
ArcelorMittal, with its 40 percent market share in North America’s automotive steel industry, claims a major influence over supply and pricing, and its joint venture with Nippon-Sumitomo could mean antitrust problems while obtaining regulatory approval, according to WSJ.
ThyssenKrupp’s Brazilian plant, which has been dogged by losses, is also expected to benefit from the deal, because the deal mandates buying 2 million tons of steel slabs from the plant for six years.
“The company’s current facilities for the auto segment in the U.S. are at high levels of capacity utilization and the NAFTA (North American Free Trade Agreement) automotive market is expected to show an increase in vehicle production of approximately 15 percent over the next decade,” ArcelorMittal said.
“This acquisition will also strengthen ArcelorMittal’s position in supplying the NAFTA energy industry, which is expected to demonstrate growing demand for energy pipe and tube products due to increases in oil and natural gas exploration and production,” the company added.
Gayathri writes about geopolitics and business for International Business Times. She began her career at the Times of India as news coordinator, before moving on to IBTimes...