TPT March 2007

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From the Americas
March/April 2007
Metals
Oregon Steel-Evraz deal needs more time
for US security review
According to officials of the two companies involved, the
unexpected resignation of the head of Evraz Group SA, the
Russian businesses seeking to acquire Oregon Steel Mills Inc, will
probably not sink the $2.35 billion deal. But both parties expected
an extension of the review period well into 2007 to allow additional
time for the US government to examine for any national security
issues.
In December, Evraz announced in Moscow that its CEO, Valery
Khoroshkovsky, was leaving immediately to take up a high-level
Ukrainian government post. Mr Khoroshkovsky, who took the helm
at Evraz only on 1 January 2006, served as economics minister for
Ukraine and in other government posts before joining the company
in 2004.
Writing in the Oregonian on 12 December, Richard Read noted
that the US regulators would be looking for indications of potential
ties between Evraz and the Russian government. In 2005, similar
issues forced the state-owned Chinese oil company CNOOC to
abandon its $18.4 billion unsolicited bid for the California-based
oil producer Unocal. In another, roughly parallel situation, in
March 2006 a state-owned Dubai company seeking a contract
to manage terminals at US ports dropped out after an uproar in
Congress.
Mr Read pointed out that the Evraz-Oregon Steel deal appears
different. “Steel lacks the national security significance of oil or
ports,” he wrote. “And Evraz is a public company with no apparent
foreign-government ownership.”
The acquisition would involve the largest Russian takeover to date
of an American company, one that would sign over an 80-year-
old Portland, Oregon firm with 680 workers to a rapidly expanding
Russian steel concern. Evraz planned to borrow $1.8 billion to
finance the deal, another aspect needing US approval.
Evraz Group is one of the world’s largest vertically integrated steel
and mining businesses, with three steel plants in Russia; Palini &
Bertoli, in Italy; and Vítkovice Steel, in the Czech Republic. If the
Russian company had closed on Oregon Steel within 2006, the
newly combined company would have produced 16.8 million metric
tons of crude steel.
• As an aside, the aborted ports deal mentioned above came to a
second point of closure on 11 December, when the giant Dubai
company DP World announced the sale of its US holdings
to the American International Group, thus bringing to an
end a contentious episode that many financial advisers say
helped drive Middle East petrodollars away from the US and
into developing market areas in Asia and elsewhere. Under
pressure from American politicians, DP World is selling terminal
operations in six ports, including New York-New Jersey and
Philadelphia; cargo-handling businesses in 16 East Coast and
Gulf of Mexico ports; and a passenger terminal in New York City
to a unit of AIG, an insurance company with little experience in
the ports business.
DP World did not disclose the price it received from the sale,
but termed it ‘fair’. Company executives said after they agreed
to sell the assets in March that they expected to realize about
$750 million. Since then, port deals have become increasingly
popular for bank infrastructure funds, like that of New York-
based Goldman Sachs, which headed a group that won
control of AB Ports, a British company, in June. The world’s
largest investment bank said its earnings for fiscal 2006, ended
24 November, reached an all-time high of $9.54 billion, more
than the previous two years combined. Its fourth straight year of
record results contributed to a stellar return on equity of 33 per
cent for the year.
Nucor looks farther afield to feed its minimills
Nucor Corp (Charlotte, North Carolina), has begun production at
its Point Lisas plant in Trinidad, the southern Caribbean island off
the coast of Venezuela. On 17 January, Nu-Iron Unlimited was
reported to have completed a five-day performance test, surpassing
an average production of 220t/hour. Dan DiMicco, Nucor’s chief
executive, told the Charlotte Business Journal that the Trinidad
facility “represents the largest current component of our strategy to
control 6 to 7 million tons per year of high-quality metallics for the
Nucor steel mills.”
In late 2004, Nucor paid $26 million for an idle steel plant in
Louisiana. The company moved the equipment of that plant, which
processed the iron ore Nucor uses as a substitute for scrap in
electric-furnace steelmaking, to Trinidad. There, where natural
gas prices are lower than in the US, Nucor increased capacity to
2 million tons per year. The Caribbean site is also better situated to
receive Brazilian iron ore, the company said.
In other news of Nucor, the second-largest US steel company
said 17 January that it had agreed to acquire the Canadian family-
owned metals producer Harris Steel Group Inc in a transaction
valued at about US$1.07 billion. Harris Steel has several business
units, including Harris Rebar (fabrication of concrete reinforcing
steel and design/installation of concrete post-tensioning systems);
Laurel Steel (manufacture and distribution of cold finished bar and
wire and wire products); and Fisher & Ludlow (manufacture and
distribution of heavy industrial steel grating, aluminium grating, and
expanded metal).
These Harris Steel operations serve customers throughout
Canada and the US. The company also participates in steel trading
worldwide through its 75 per cent ownership of the Swiss trader
and distributor Novosteel and in the distribution of reinforcing
steel and allied products to US customers through Harris Supply
Solutions.
US bans recycling 1-cent and 5-cent coins
for their higher metal value
Concerned that rising metal prices could prompt widespread
melting down or exporting of the two lowest-valuation US coins in
circulation, the Mint on 15 December imposed a ban on such use of
pennies and nickels. Penalties for violation are stiff: a $10,000 fine
and up to five years in jail.