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ArcelorMittal Enters Russian Coal Market
The world's largest steel smelter ArcelorMittal confirmed yesterday that it has entered the Russian coal market, on the second try, buying assets in Kuzbass from Severstal, the company that competed with Mittal in 2006 to merger with Arcelor. The value of the deal was $720 million. It will be ArcelorMittal's first independent business in Russia and its third in the CIS.
ArcelorMittal is paying $650 million for 97.59 percent of the Berezovskaya coal mine and 99.35 percent of the Pervomaiskaya mine, along with the Severnaya processing plant, controlling packages in auxiliary enterprises and 100 percent of ZAO Zhernovsky-3, the company that holds the license to develop the coal filed with the same name, which has reserves of 170 million tons. In addition, Severstal affiliate Frontdeal Ltd. will sell ArcelorMittal 100 percent of OAO Anzherskoe Mine Management for $70 million. The deal will take several months to finalize.
Severstal spokesmen explained that the company bought the Kuzbass properties in the early 2000s to ensure steady coal supplies. Since the acquisition of mines in Vorkuta, however, the Kuzbass mines play a secondary role. ArcelorMittal, moreover, offered “a good price.” ArcelorMittal head Lakshmi Mittal stated that the acquisition of the Kuzbass mines will increase his company's self-sufficiency by 10-15 percent and strengthen its position on the rapidly growing Russian market.
ArcelorMittal attempted to enter the Russian market last year when it filed an application to participate in the auction of 68.86 percent of Elgaugol and 75 percent minus one share of Yakutugol, but it was not permitted to and Mechel acquired those shares. Nor was ArcelorMittal able to become a partner of the Russian winner. ArcelorMittal is expected to continue its efforts to expand in Russia.
ArcelorMittal has inherited a problematic image in the CIS from Mittal. There have been numerous tax claims, safety violations and labor disputes in Kazakhstan, where Mittal entered more than ten years ago. After Mittal acquired 93.02 percent of Krivorozhstal (now Arcelor Krivoy Rog) in Ukraine, there was also a wave of labor unrest.
www.kommersant.com
All the Article in Russian as of Feb. 01, 2008
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Photo: Vasily Shaposhnikov
