Russia's MMK Plans to Increase Investments in Turkish Unit

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russian steelmaker Magnitogorskiy Metallurgicheskiy Kombinat (MMK) (Moscow, Russia) will invest an additional $100 million in its Turkish plant to boost efficiency and take advantage of a market recovery. "The investment will begin from 2013," MMK Metalurji CEO Vitaly Galkin said.

"We may sell a stake to a Turkish, Middle Eastern or Latin American investor to develop the mill, which will reach annual capacity of 2.3 million tons of steel next year," he said. His sales expectation for the Iskenderun-based Turkish unit is 1 million tones of steel for this year. He said several partnership models were under consideration, and no deadline for a sale had been set. According to Interfax, he said that "the company had been in talks with several players in steel sector, from Latin America and the Middle East and Turkey."

Separately, MMK CEO Boris Dubrovsky said in a statement that the company plans to increase its technical and production capacities in a Turkish subsidiary. He said earlier this year that the company would consider selling a 49% stake in MMK Metalurji, provided the plant is running at its full capacity and a decent offer is in place.

MMK bought the 49% stake in the Turkish unit from the Atakas family last year for $475 million, raising its ownership to 100%. "The growth in demand for steel in Russia and the world in general, along with the increasing production capacity of MMK Group in Turkey, make it reasonable to expect higher sales volumes for MMK Group in 2012 in comparison to 2011," MMK said in its trading update announcement for the third quarter.

Steel smelting in third-quarter 2012 totaled 170,000 tons, which is 40% less than in the second quarter. The sale of finished products from MMK Metalurji in the third quarter amounted to 211,000 tons, which is 26% lower than in the second quarter. "This decrease largely stemmed from the lower output of commercial hot-rolled products, the production of which is not economically sustainable in current market conditions," MMK Metalurji said in a trade statement.

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