A red hot slab of steel emerges from furnace number one Thursday, Sept. 9, 2010 in the hot strip mill at the ThyssenKrupp steel mill in Calvert, Ala. . (Credit Photo @ Press-Register/Bill Starling)
ThyssenKrupp AG will consider selling its steel mills in Mobile and Brazil in the midst of rising production costs and a slump in demand, company officials announced today. Chief Executive Officer Heinrich Hiesinger said in a statement that the company’s Steel Americas division — which includes a carbon steel plant in Rio de Janeiro and a carbon steel processing facility in north Mobile County — is the company’s “biggest challenge.” “We continue to believe that both plants will hold leading positions in their respective markets in terms of technology and conversion costs,” Hiesinger said. “But since the plans for the project were made, the economic parameters both in Brazil and in the USA have changed from our original assumptions.” The local facility, which employs 1,800 people, processes and finishes slabs that are initially produced and shipped from the Brazilian plant. The company said it faces rising production costs with higher labor expenses and ore prices and overall inflation. Meanwhile, the company pointed to slow demand in the U.S. “The viability of an integrated strategy with slab production in Brazil and high-margin marketing in the U.S. is therefore exposed to considerable risks,” the company said. The company said it would be examining “strategic options in all directions for both plants” including a buyer or partner. The division has been a heavy drag on the company’s bottom line, most recently running an operating loss of 516 million euros ($659 million) for the first half of this year. Earlier this year, Hiesinger said that he would wait until operations at the sites were running at full speed before making a decision on the future of Steel Americas, despite continued losses. He said in February that the process of fully ramping-up wouldn’t be complete for another 1 ½ years. Bridget Freas, a Chicago-based analyst with Morningstar Inc., who follows ThyssenKrupp, said that the company’s announcement Tuesday is a formal step in that process – notifying the board of its intention to look at all of its options. “I think this announcement is really nothing different than what they’ve said before,” Freas said. She said that until both plants are fully operational, it’s hard to put a price tag on the plants. She added that a sale wouldn’t be likely until 2013, at the earliest. The facilities have a book value of 7 billion euros ($9 billion), which is below the company’s investment in the facilities of 12 billion euros, according to a Reuters report. In Brazil, Freas said, companies that are producers of iron ore would be potential buyers. A sale of the Mobile site would be more difficult, she said, because a buyer would need to have their own steel slabs. After an intense competition, ThyssenKrupp in 2007 chose Alabama over Louisiana to build a $5 billion steel mill. The project in north Mobile County received more than $1 billion in state and local aid, including tax breaks and incentives. Earlier this year, the company agreed to sell its stainless steel business to Outokumpu Oyj of Finland for 2.7 billion euros ($3.6 billion). The stainless business, now called Inoxum, operates part of the company’s steel mill in Mobile, employing 550 people locally.
Source : Press Register