Why NSSMC said yes to JV buy of TK plant

Feb 06, 2014 | 12:36 PM | Jo Isenberg-O’Loughlin

Tags  steel, steel mill, joint venture, acquisition, ThyssenKrupp, ArcelorMittal, Nippon Steel & Sumitomo Metal, NSSMC Calvert

NEW YORK — As guessing games go, speculation on who would pay what for ThyssenKrupp AG’s ailing $5-billion steel processing plant in Calvert, Ala., known as Thyssen­Krupp Steel USA LLC, ranks among the most rampant in the history of global steeldom.

All the marquee names looked—or were rumored to have looked—at the underperforming asset, the failure of which not only bruised the image of two storied European industrial dynasties but called into question the reputation of German steelmaking technology and knowhow.

In the end, a year-and-a-half after ThyssenKrupp put Calvert up for sale, two longtime joint-venture partners—Luxembourg’s ArcelorMittal SA and Japan’s Nippon Steel & Sumitomo Metal Corp. (NSSMC)—teamed up again to purchase what ArcelorMittal chairman and chief executive officer Lakshmi Mittal described as "the most modern finishing facility in the world" in a Nov. 29 statement announcing the acquisition.

In exchange for a total investment of about $1.55 billion split down the middle, the world’s largest steel producer (ArcelorMittal) and second-largest producer (NSSMC) secured what each sees as a key to future growth compliments of projected demand from the North American Free Trade Agreement (Nafta) automotive and energy markets. ArcelorMittal is forecasting a notch above 15-percent growth in Nafta’s demand for steel over the next 10 years.

Neither company, of course, is a stranger to joint ventures or to each other. And although no such undertaking is totally friction-free, there’s little question that the working relationship the two established over the years as joint owners of the I/N Tek and I/N Kote cold-rolled steel and coated products operations in New Carlisle, Ind., mitigated concerns related to any potential fallout from conflicts over opposing views and/or strategies.....

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