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  July 23rd, 2014 | Written by

Giant Russian Steelmaker Shutters US Operations

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Los Angeles, CA – Russian steelmaker Severstal is divesting itself of its steel production and coal mining operations in the US.

The move was reportedly motivated by the company’s fears that the increasing tensions between Washington and Moscow over the crisis in Ukraine will reduce, or even cut off, its access to loans from Western financial institutions.

Russia’s second largest steel maker said it would sell its two US steel facilities in Mississippi and Michigan for $2.3 billion to US rivals Steel Dynamics and AK Steel, respectively. Both plants produce steel products for the automotive sector.

According to a statement released by the Severstal, the company reported a $100 million loss on revenue of $3 billion last year, a development that it hopes will be offset by the US divestment.

“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,” said Alexey Mordashov, Severstal’s chief executive.

The ‘mini-mill’ in Columbus, Mississippi, is considered one of the most modern in the US, and is expected to increase its operating base by as much as 40 percent.

Steel Dynamics said the $1.6 billion purchase of “one of the most modern mini-mills in North America,” in Columbus, Mississippi, will expand its operating base by 40 percent.

The $700 million purchase of the Dearborn, Michigan, steel plant, “will add about one-third additional capacity to the company’s operations,” said AK Steel.

At the same time, Severstal said that it would sell US coal producer PBS Coals to Toronto, Canada-based Corsa Coal Corp. for a reported $140 million.

The sale comes after the Russian company paid about $1 billion for PBS in 2008 to provide a steady supply of coking coal for its US steelmaking operations.

Corsa said it will pay $60 million in cash, assume $60 million of reclamation and water-treatment liabilities, and give the former Russian owner the balance of $20 million “in collateral for other liabilities.”

The sale of PBS Coals is expected to be completed by mid-August, Severstal said.

PBS is located about 60 miles from Pittsburgh, Pennsylvania, and has 13 developed and three active mines that produced 1.7 million tons of coal last year.

07/23/2014