OAO Severstal, the Russian steelmaker controlled by billionaire Alexey Mordashov, agreed to sell its mini-mill in northeast Mississippi to Fort Wayne-based Steel Dynamics Inc. for $1.6 billion in cash.
Severstal early Monday morning announced it was departing the U.S. market with that sale and by selling a plant in Michigan to Ohio-based AK Steel Holding Corp. for $700 million.
Severstal’s imminent departure from the U.S. comes amid heightened tensions between America and Russia over Ukraine, where pro-Russian separatists continue to control key cities. Mordashov and Severstal haven’t been targeted by U.S. or European Union economic sanctions. The billionaire’s companies as of April controlled a stake of about 6 percent in OAO Bank Rossiya, which has been targeted.
Steel Dynamics said the Mississippi plant it is acquiring, commissioned in 2007, is one of the newest and most technologically advanced mini-mills in North America. The mill has a production capacity of 3.4 million tons, boosting Steel Dynamics’ annual steel shipping capacity to 11 million tons.
Morgan Stanley analyst Dmitry Kolomytsyn said by phone from Moscow before the announcement that because Severstal has been looking for a buyer since December, “the agreement to sell those assets has nothing to do with the Russia-West tensions over Ukraine.”
On July 15, Severstal agreed to sell its U.S. coal unit to Canada’s Corsa Coal Corp. for $140 million.
The U.S. steel industry has been dogged by excess capacity and depressed prices since the financial crisis. As of July 14, 21 percent of its capacity was unused, according to data from the American Iron & Steel Institute. U.S. steelmakers have also fought a succession of legal battles to curb cheap imports.