Skip to main content

See also:

Russia sells off American steel mills used for auto production

 The Severstal Wheeling South Works Steel Plant sits empty in the Ohio Valley on May 5, 2009.
The Severstal Wheeling South Works Steel Plant sits empty in the Ohio Valley on May 5, 2009.
Photo by Rick Gershon/Getty Images

Although Russian billionaire Alexei Mordashov denies that politics has anything to do with his decision to sell off his company’s steel mills in the US, Severstal, Russia's 2nd largest steel producer has announced that it has agreed to sell its Ford Rouge steel mill in Dearborn, MI, as well as another subsidiary in Mississippi to American owned Steel Dynamics and AK Steel Corp. for $2.3 billion as tensions continue to rise between Russia and the US over Ukraine and other issues. These have also had a major impact on Russia’s economy (which has taken a major hit). Sevestal originally bought the old Ford facility for $285 million in 2004.

Severstal has already divested its steel plant s in West Virginia and Maryland, as well as one in Columbus, OH, despite the fact that its North American operations producing steel used primarily for the auto industry have accounted for nearly 28% of its total assets. It was also reported that Steel Dynamics, which has agreed to buy Severstal's Columbus, OH for $1.625 billion which it said would be paid for with a mix of cash and debt. Built in 2007, the plant is said to have a "production capacity of 3.4 million tons." In the meantime, it was also reported that AK Steel is paying "$700 million in cash for the Ford Rouge assets, and is funding the acquisition through a debt and share deal it expects to complete in the fourth quarter."

Severstal began investing heavily in international steel mill acquisitions during the early years of the new millennium. However, the profit margin in America has lagged compared to the domestic Russian market since the financial crisis in 2008, with large steel producers such as Tata Steel, ThyssenKrupp and AecelorMittal cutting back on their own production, laying off workers and selling off their mills due to weakened prices and overseas competition.