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Mechel acquisition to boost Yildirim's ferrochrome offering

Keywords: Tags  Mechel, Yildirim Group, ferrochrome, chrome, Daniel Fitzgerald

NEW YORK — Yildirim Group will be able to offer a wider chemistry of ferrochrome in the U.S. market following its acquisition of Mechel OAO’s ferrochrome assets.

Russian coking coal and steel producer Mechel agreed to sell its chrome mine in Kazakhstan and its Russian smelting operation to Turkey’s Yildirim for $425 million, Mechel said Aug. 1.

The acquisition "will give us more variety to offer as the chemistry is different than our material" and will help "get our name out there for those who still don’t know how big we are," a source at Yildirim told AMM.

However, he doesn’t expect the move to have a meaningful impact on U.S. ferrochrome prices in the short term.

"There might be (an impact on prices), but not an immediate impact, as the market is oversupplied and there is not enough demand," he said.

The consolidation of U.S. ferrochrome suppliers "should put a floor on chrome prices," another trader said.

High-carbon ferrochrome is currently trading at 94 cents to $1 per pound, having steadily dropped in recent months due to weak spot demand and currency depreciation in South Africa.

Pending approval by Kazakh and Russian regulators, Yildirim will acquire Mechel’s Voskhod Mine in Kazakhstan’s Khromtau region and Tikhvin ferroalloys plant in Russia’s Leningrad region.

The Tikhvin plant, Russia’s second-largest producer of high-carbon ferrochrome, consumes half of the Voskhod Mine’s output and can produce 120,000 tonnes per year of high-carbon ferrochrome, with 69.5-percent chrome content.

Mechel is in the process of selling a range of its global assets to pay debts and minimize losses.

The New York-listed miner has accumulated massive debts over the past few years by investing heavily in coal and steelmaking assets and setting up a network of service and distribution centers.

Mechel will use the proceeds of the deal to pay down its debts and finance "priority development projects," which likely include its universal rolling mill in Chelyabinsk in the Russian Urals, and the continued development of the Elga coal deposit in eastern Siberia.

Nadia Popova, Moscow, contributed to this story.

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