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Severstal eyes profitability, sustainability

Keywords: Tags  Severstal North America, Saikat Dey, Dearborn, Columbus, Sergei Kuznetsov, business strategy, OAO Severstal, Catherine Ngai


NEW YORK — The new management team at Severstal North America LLC has set its sights on making the steelmaker more profitable and sustainable, according to its top executive.

"We’ve come to the realization, quickly, that ... the needs of the business have kind of moved on from what they used to be a couple of years back," Saikat Dey, the Dearborn, Mich.-based steelmaker’s new chief executive officer, told reporters during an Oct. 3 conference call. "I don’t think of it (management changes) as a new direction, but a prioritization of our focus."

Severstal NA has seen a major overhaul of its executive team in recent weeks, including the departure of then-chief executive officer Sergei Kuznetsov (amm.com, Sept. 3). Dey said the moves reflect a changing marketplace, particularly because the old team worked on larger capital-intensive projects and the new team will work on profitability and cost savings.

"The team that preceded was very good at a couple of things which was needed for the time—building new assets, investing in Dearborn and creating a brand-new infrastructure," he said. "They maintained and grew the automotive business and did a lot of big mergers and acquisition deals, including the divestment for RG Steel (LLC)."

Critics said that losing the old executive team has meant a loss of institutional steel knowledge and a loss of solidified relationships with service center and end-market customers. While Dey acknowledged that the company, a subsidiary of Moscow-based OAO Severstal, has lost some ground in that area, he insisted the new management team is committed to filling in any holes.

"In terms of the team we have in place right now, it is a pretty strong team," he said. "It’s a team that’s got solid academic credentials, as well as very good backgrounds. Most of them are excellent problem solvers, and I believe we’ll introduce a new frame of thinking to the steel industry which will be fresh and innovative."

Severstal NA, which has an integrated facility in Dearborn along with a mini-mill in Columbus, Miss., has established five "pillars" for its business strategy: better engagement of its employees, more targeted sales and marketing efforts, better quality and customer delivery, enforcing a strict cash discipline and making its assets more reliable.

The outlook for the steel industry is bright, Dey said, noting that a growing construction sector and continued strength in the automotive market mean 2014 will be on the upside. "In terms of steel pricing, it’s fairly positive for us. We still think it’s a good year coming now for various reasons," he said, although he acknowledged that while flat-rolled demand is on the upside, "pricing is still in the toilet."

Imports also have been a concern for the steel producer, with Dey saying that foreign product was the main reason behind the company’s margin erosion. "As overcapacity looms larger, some products are more affected than others," he said, without specifying particular product groups or country origins. "With specific trade cases, that just distributes imports into other parts of the value chain. That 300 million to 400 million tons of overhang (globally) isn’t going anywhere."

As for its own mills in the United States, Dey said Dearborn and Columbus are effectively running at or near full capacity, although the producer would not have enough market power to "change a penny" in the overall supply and demand balance.


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