Articles in Category: M&A Activity

SSAB Borlange plant

Roland Magnusson/Adobe Stock

Swedish steelmaker SSAB has ended discussions with India’s Tata Steel over potential acquisition of IJmuiden plant, or Tata Steel Netherlands, the Stockholm-headquartered group stated Jan. 29.

“After deeper analysis and discussions, it became clear that there were limited possibilities to integrate IJmuiden into the SSAB strategic framework,” SSAB said in a statement. “Discussions with Tata Steel have therefore concluded.”

The Swedish company cited its desire to move toward fossil-free steel production as one of the reasons behind its decision.

“The group’s goal is to be the first in the world, in 2026, to supply fossil-free steel to market and to be a fossil-free company by 2045,” SSAB stated.

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SSAB walks away from costs

Prospective synergies would not justify necessary costs and investments into IJmuiden for SSAB’s desired transformation, the Swedish group added.

Tata Steel acknowledged SSAB’s withdrawal from interest in IJmuiden. However, Tata said it remains committed to a strategic resolution for its European portfolio.

“Currently, around two third of the business of Tata Steel is based in India with best in class, highly cost competitive assets and strong cash flows and Tata Steel remains committed to undertake significant de-leveraging in FY21 and beyond,” the Indian group said.

Tata Steel’s European assets include IJmuiden and the integrated Port Talbot works, or Tata Steel UK.

SSAB originally announced in November that it was speaking with Tata about acquiring IJmuiden. However, at the time it warned there was no guarantee of any deal.

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German steelmaker ThyssenKrupp must be desperate to get rid of its steel business.

The steelmaker makes a great range of products of world-class quality. The brand has undeniable strength as a result.

However, it has not and cannot make money from it.

ThyssenKrupp steel division posts losses

The ThyssenKrupp steel division lost money last year.

Quite how much is difficult to say.

However, the Financial Times reported last year the firm predicted losses of a billion Euros for 2020. That is a not inconsiderable proportion of total group losses of more than €5.5 billion reported by the Financial Times this week.

The same article reports the group’s proposal to spin off the steel division as a separate entity, apparently in the expectation it would be easier to raise investment as a standalone unit.

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Previous efforts

Efforts to sell or merge the steelmaking division with competitors in recent years have failed repeatedly.

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U.S., China and Russia flags

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This morning in metals news: the United States Trade Representative released its annually mandated report covering the WTO rules compliance of China and Russia; U.S. Steel officially closed on its acquisition of the remaining equity of Big River Steel; and the Pilbara Ports Authority earlier this month reported shipping data for December.

USTR releases annual WTO compliance report for China, Russia

As mandated by Congress, the United States Trade Representative on Friday released its annual report on the WTO compliance of China and Russia.

“The United States has been closely monitoring China’s progress in implementing its numerous commitments under the Phase One Agreement and has regularly engaged China using the extensive consultation processes established by the agreement to discuss China’s implementation progress and any concerns as they arise,” the report reads. “Currently, the evidence indicates that China has been moving forward in good faith with the implementation of its commitments, making substantial progress in many areas.

“Because the Phase One Agreement does not cover all of the United States’ concerns, the United States will need to turn to Phase Two of its trade negotiations with China in order to secure resolutions to important outstanding issues.”

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U.S. Steel closes acquisition of remaining Big River Steel equity

In December, U.S. Steel announced plans to acquire the remaining equity in Arkansas-based Big River Steel for $774 million.

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low carbon steel

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This morning in metals news: Rio Tinto has committed $10 million toward its research partnership with China’s Baowu Steel Group; meanwhile, Freeport McMoRan completed the sale of an undeveloped project in the Democratic Republic of the Congo; and, lastly, copper remains at an over seven-year high.

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Rio Tinto commits $10M investment toward low-carbon steelmaking research

Miner Rio Tinto has announced a commitment of $10 million toward its low-carbon steelmaking research partnership with Chinese steelmaking giant Baowu Steel Group.

“Rio Tinto’s investment will fund the joint establishment of a Low Carbon Raw Materials Preparation R&D Centre, which will initially prioritise the development of lower carbon ore preparation processes,” Rio Tinto said in a release Wednesday. “This will include creating two ore preparation pilot plants, one to use biomass and the other exploring using microwave technology. The investment will also support work on carbon dioxide utilisation and conversion at the China Baowu Low Carbon Metallurgical Innovation Centre, which is a Baowu-led open platform for advancing metallurgical technologies to support the low-carbon transformation of the steel industry.”

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European Union flag

Andrey Kuzmin/Adobe Stack

(Editor’s Note: This is the first of a two-part review of the European steel sector.)

While steelmakers east of Berlin are working to meet rising demand, others are facing myriad technical and regulatory challenges.

Those challenges include a global pandemic that has severely impacted economies, industry watchers and market participants told MetalMiner.

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European steel faces higher costs, environmental restrictions

Steel plants in Central and Eastern European states that are members of the European Union face not only higher costs, but also environmental restrictions that could eventually mean an additional $30-40 per tonne to make steel.

China’s recovery from the coronavirus pandemic has led to increases there in steel production and cheaper imports.

As a result, China’s rebound has further impacted European steelmakers in Central and Eastern Europe.

‘Shifting east’

Foreign metals and mining groups started to acquire plants in Central and Eastern Europe in the late 1990s to early 2000s. Governments in those regions sought to privatize what in many cases were previously state-owned assets.

“The view was that the market was shifting east in terms of manufacturing bases,” as Western European automakers and white goods producers were setting up shop in those countries, one analyst said.

Some of the acquired assets also have either captive raw materials sources or easier access to them. This solved potential supply chain questions and allowed the acquiring groups to redistribute material elsewhere within their own network.

Many of the newer member states that joined from 2004 were also receiving subsidies from Brussels for infrastructure improvements. Those improvements would, in many cases, require steel, the analyst added.

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mergers and acquisitions

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As we noted yesterday, flats and specialty steels producer SSAB is in talks with Tata Steel over potential acquisition of the Indian group’s IJmuiden integrated plant in the Netherlands, the Swedish group confirmed.

“SSAB has participated in several different discussions concerning consolidations in the European steel industry. The discussions with Tata are on-going but no decisions have been made,” SSAB said Nov. 13.

“There can be no certainty that any transaction will materialize, nor as to the terms of any such potential transaction. Further announcement will be made in due course,” the Swedish group added.

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SSAB profile

SSAB’s product assortment includes plates, tubes and special steels. The group’s Luleå plant in northern Sweden produces steel and casts slab for rolling and coating at its Borlänge plant further south in the country.

The company also produces specialty steels at its Oxelösund integrated plant, south of capital city Stockholm, where it also rolls them into finished products.

SSAB acquired Finnish steelmaker Ruukki in 2014. In addition, the group produces plates and hot-rolled coil in the United States via one electric arc furnace at Alabama and at Iowa with a total capacity of 2.4 million tons per year.

SSAB’s IJmuiden interest

SSAB has eyed IJmuiden for at least a year, one analyst familiar with the situation told MetalMiner.

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Airbus plane

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including the AirbusBoeing subsidy saga, industrial production, Liberty Steel’s bid for German firm Thyssenkrupp’s steel division and much more.

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Week of Oct. 19-23 (Airbus-Boeing saga, industrial production and more)

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Sanjeev Gupta’s GFG Alliance and, in particular, its steel and aluminum subsidiary Liberty Steel, is rarely out of the news, it seems.

The firm’s insatiable appetite for bankrupt or struggling metals assets has the market split. One the one hand, boosters are cheering its entrepreneurial spirit. On the other, naysayers are questioning the opaque funding structure and apparently high levels of expensive debt underpinning what they see as a potential house of cards.

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Liberty Steel eyes Thyssenkrupp’s steel business

We are more interested in the implications for the steel market.

Liberty’s latest foray into acquisitions would create a potentially disruptive behemoth in a crowded European market. That market is facing intense foreign competition and declining demand as a result of a pandemic-induced slowdown in manufacturing.

That Thyssenkrupp is desperate to sell its loss-making steel business is not new news.

The steel division has been a major drag on the group. According to the Financial Times, the group is likely lose €1 billion ($855 million) this year.

This year, Thyssenkrupp sold its elevator business for $17 billion in an effort to shore up its finances. The firm has been in talks with other steelmakers, including Sweden’s SSAB and India’s Tata, the Financial Times reported.

So far, however, Thyssenkrupp hasn’t found a buyer that would pass competitions scrutiny.

Which raises the question: will Liberty?

Liberty’s bid

Liberty runs plants and mines across North America, Australia, and India. The firm has global revenues of $15 billion and a workforce of 30,000.

Thyssenkrupp’s beleaguered Steel Europe unit generates sales of approximately €9 billion with 27,000 employees. Together, the firms would become the second-largest steelmaker in Europe, behind only ArcelorMittal.

Logic says in a market suffering poor capacity utilization, rationalization would be one recipe for turning the group around. However, unions and state governments are likely to fiercely resist widespread redundancies.

The German union IG Metall has held demonstrations to oppose job losses and demand government bailouts. Brussels previously denied a Thyssen-Tata merger over fears it would reduce competition. As such, it remains to be seen how it will view a Liberty-Thyssen takeover.

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Ford Motor Co.

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This morning in metals news: Ford’s China sales posted their largest year-over-year increase in Q3 since 2016; overall automotive sales in China gained 12.8% year over year; and Liberty Steel Group announced it has made an offer to acquire German firm Thyssenkrupp’s steel business.

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Ford’s China sales rise 25.4%

Ford’s China sales rose 25.4% on a year-over-year basis in the third quarter, the automaker reported.

The year-over-year gain in China marked Ford’s strongest sales gain in the market since 2016.

“Ford is strengthening its sales momentum in China by building on growing consumer preference for our iconic brand and favorable product mix of luxury and near-premium utility vehicles,” said Anning Chen, president and CEO of Ford China. “Our localization strategy to produce in China world-class Ford and Lincoln vehicles, including the newly launched Ford Explorer, Lincoln Corsair and Lincoln Aviator, has further enhanced our competitiveness in delivering the best products and services that Chinese consumers are looking for.”

Auto sales in China up again

Meanwhile, overall automotive sales were up in China for a fifth straight month.

Auto sales in the country rose 12.8% year over year in September, according to the China Association of Automobile Manufacturers.

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mergers and acquisitions

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As we noted earlier this week, the Cleveland-Cliffs acquisition of ArcelorMittal USA came at a price tag of $1.4 billion.

This comes after Cleveland-Cliffs acquired AK Steel earlier this year (among other things, AK Steel is the lone remaining U.S. producer of electrical steel).

The deal includes nearly all of the ArcelorMittal subsidiary’s North American facilities (with a few exceptions, as we will elaborate on shortly). Cleveland-Cliffs expects to close the deal in Q4 2020.

Since the announcement, Cleveland-Cliffs shares are up over 12%.

So, what does the merger mean for the North American metals scene and relevant sectors, like automotive?

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Initial reaction to Cleveland-Cliffs acquisition of ArcelorMittal USA

Overall, this seems to be a solid move for everyone involved.

ArcelorMittal offloads old assets that have a high cost structure for producing steel while still maintaining a mill with one of the lowest cost structures in the country.

On the other hand, Cliffs gains a large auto book of business with good margins. Furthermore, the steel market will see old, expensive capacity taken out. As such, that will make room for new capacity scheduled to come online in the near future.

Strengthening auto position

As noted previously, the acquisition makes Cleveland-Cliffs the largest flat-rolled steel producer in North America. The deal will also make Cleveland-Cliffs — the oldest iron ore mining company in the country — the largest iron ore pellet producer in North America, with 28 million long tons of capacity.

The deal further strengthens the company’s position in the automotive sector. The company likely controls 60%-65% of exposed auto sheet supply (think the steel used on the outside of a car).

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