Severstal’s $2 Billion Capital Spending Skips Sparrows Point

OAO Severstal, the parent company of Severstal North America, which owns the Sparrows Point steel mill, announced a $2 billion capital investment budget this week, but none of the funding will be coming to its Baltimore County operation.

One of the largest integrated steel and mining companies in the world, the Russian-owned OAO Severstal announced that the total investment at Severstal North America will be approximately $465 million in 2011. That figures marks a 53 percent increase over 2010.

However, according to a press release, Severstal North America’s capital investment funding will bypass its mills up for sale – at Sparrows Point, Warren, Ohio and Wheeling, WVa. The Renco Group, a New York-based investment company, is currently in negotiations to buy the three plants, according to numerous reports.

Severstal North America capital improvements will include the construction and commissioning and start-up of the second electric arc furnace, the continuous caster, tunnel furnace, pickle line and the second hot dip galvanizing line at Severstal Columbus in Mississippi, and a new cold rolling complex and hot dip galvanizing line at Severstal Dearborn in Michigan.

The Sparrows Point, Warren and Wheeling plants are represented by the United Steelworkers and reportedly are being offered as package, Severstal North America maintains its non-union Columbus mill and Dearborn headquarters.

Severstal spokeswoman Katya Pruett told the Warren Tribune Chronicle that Severstal North America Inc. will continue with its previously announced capital investments, updating information "as the market dictates."

Asked for an update of a potential sale, Pruett said the company has been "exploring strategic alternatives for certain of our assets. The review is ongoing,” according to Tribune Chronicle.

The largest chunk of the Severstal investment, $940 million, will toward several steel mill projects at two facilities in Russia. Another $465 million in investments will be directed toward modernization of iron ore operations in Russia and Liberia.

 “In 2011, Severstal will continue to make investments across its businesses in order to enhance our position as a market leader in the production of high added value products, improve our operational efficiency and reduce costs,” said Alexei Kulichenko, CFO of Severstal. “In Russia and CIS (Commonwealth of Independent States), steel use is estimated to increase by approximately 8 percent in 2011.”