Vladimir Lisin did not bargain with ArcelorMittal

The Novolipetsk Metallurgical Combine will not receive ArcelorMittal plants in Belgium and Luxembourg.
NLMK Vladimir Lisin did not agree with ArcelorMittal on the purchase of factories and lines for the production of cold-rolled and galvanized steel in Belgium and Luxembourg, the British Liberty House Group will become their buyer. Analysts say that the deal would allow NLMK to supplement its EU asset portfolio with niche galvanizing, but the company could be repelled by the high cost of production on ArcelorMittal assets.

On November 2, ArcelorMittal Metallurgical Company announced that it had agreed with the British Liberty House Group on the sale of the Dudelange plant in Luxembourg and production lines for galvanizing, pickling hot-rolled steel, cold-rolled and tin packaging of the ArcelorMittal Liege unit in Belgium. Their capacities were not disclosed, but in 2017, the Belgian division of ArcelorMittal produced 5.5 million tons of steel from 40.9 million tons of the entire European division of the company (there are no data on Dudelange). The amount of the transaction was not disclosed, and its closure depends on a number of conditions, since the sale of a number of European enterprises by ArcelorMittal is a requirement of the antimonopoly regulator for the acquisition of the Italian plant Ilva by the company (producing up to 10 million tons of steel per year). The Liberty House Group also buys back ArcelorMittal assets in the Czech Republic, Romania, Macedonia and Italy. All of the European assets put up for sale by the investment bank Jefferies was estimated at $ 752–940 million with a book value of $ 1 billion.

Dudelange and Liege were of interest to various metallurgists, including NLMK Vladimir Lisin, local media reported in April with reference to trade union leaders of Liege. NLMK in Europe has a steel sheet manufacturing plant Dansteel and a stake in NLMK Belgium Holdings (NBH), which includes flat and thick sheet mills that roll slabs from Lipetsk. Dansteel for January — September sold 400 thousand tons of products, NBH - 1.7 million tons, while the holding basically operates at zero or at a loss. In addition, NLMK recently lowered its stake in NBH to 49% from 51%, which sources of “Kommersant” and analysts attributed to fears regarding the expansion of Western sanctions (see “Kommersant” on September 28).

Analysts had previously noted “Kommersant” that the acquisition of ArcelorMittal assets would help NLMK to implement a strategy for expanding steelmaking capacities in Lipetsk and rolling - in Russia and abroad. In addition, the new rolling lines in the EU would help NLMK to avoid the increased cold-rolled steel duties imposed on its supplies to Europe from Russia. True, now such supplies are “only tens of thousands of tons,” sources of “Kommersant” noted recently, while NLMK was primarily interested in galvanizing lines.

On Nov. 2, NLMK declined to comment, while ArcelorMittal did not respond to a Kommersant request. But NLMK President Grigory Fedorishin in April clarified that M & A deals remain “a very opportunistic component of the strategy,” and the company will rely on organic growth, as in the previous five to seven years. At the end of October, at a conference call with analysts, he did not go into the details of negotiations with ArcelorMittal, but noted that these were cold-rolled and galvanized facilities, and this would not have allowed NLMK to increase slab supplies to Europe.

Andrei Lobazov from Aton notes that the purchase of galvanized assets from ArcelorMittal would allow NLMK to enter niche, more marginal markets (in Russia, galvanized steel yields about $ 200 per ton in EBITDA, while the sheet is about $ 100 per ton). But for NLMK in Europe it is much more important to expand the capacity for slab rolling from Russia (i.e., hot rolled products), and the abandonment of galvanizing lines may indicate that production costs for them are too high, the analyst adds.