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TK Steel Americas sale said near; market waits

Keywords: Tags  steel, ThyssenKrupp, Steel Americas, ArcelorMittal, Nippon Steel & Sumitomo Metal, Cia. Siderurgica Nacional, Calvart, Catherine Ngai

NEW YORK — Market rumors have been circulating since late last week on the imminent sale of ThyssenKrupp AG’s Steel Americas operations in Calvert, Ala., with some market players expecting the deal to help tighten supply and increase pricing in the Southeast.

Market participants are expecting an announcement as early as this week from the Essen, Germany-based steelmaker or from the likely joint buyers—Luxembourg-based ArcelorMittal SA and Tokyo-based Nippon Steel & Sumitomo Metal Corp. While AMM could not confirm the bid, the move by the world’s largest and fourth-largest steelmakers, respectively, could mean consolidation in the U.S. market.

A ThyssenKrupp spokeswoman said the company knows "there is a lot of speculation going on" but it is still in negotiations and would not comment on market rumors.

An ArcelorMittal spokeswoman said the company was unable to comment because it is in a "closed period" prior to releasing its third-quarter results Nov. 7. Nippon Steel could not be reached for comment.

Cia. Siderúrgica Nacional SA was a recent bidder, but many speculated that the Brazilian company’s offer was not as attractive.

The announcement of a joint bid could impact the flat-rolled sector.

"One thing this ArcelorMittal (Nippon)-Thyssen deal will do is firm up the market—it absolutely will," one Midwest service center source said, adding that industry consolidation would help an oversupplied market.

At least one U.S. competitor mill—in anticipation of a ThyssenKrupp sale—drafted an Oct. 29 internal letter to temporarily suspend all contract negotiations and price offers in a move that seems to validate the rumored upcoming announcement.

ThyssenKrupp was expected to announce its sales agreement of the Alabama facility in May, but clarified in an earnings call that it was still in "advanced" negotiations with the leading bidder (, Aug. 13).

Others speculated that if a ThyssenKrupp acquisition announcement was made, U.S. steelmakers could use it as a catalyst to raise prices because of the perception of fewer tons in the marketplace.

"If the announcement happens, the mills can quickly raise prices again," one trader said.

One concern among buyers, however, is how 2014 contracts will play out, particularly as any signed deals with customers will be transferred to another mill. Sources indicated that concessions that are part of ThyssenKrupp contracts will be carried over.

It makes sense to have ArcelorMittal and Nippon as the top contenders in the bidding process, according to Charles Bradford, an analyst at New York-based Bradford Research Inc.

"The plant in Alabama was built for companies like Mercedes(-Benz) and BMW using IF (interstitial-free) steel. No one has IF-grade slab except what ThyssenKrupp can make in Brazil, what ArcelorMittal can make in Brazil and what Nippon Steel can ship over," he told AMM. "It’s scarce because there isn’t much of a market for that product."

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